Why SGD ETFs Deserve a Second Look

If you’re just starting to invest, chances are you might have come across someone or an online post that suggested to “just buy the S&P 500”. While it is true that the S&P 500 has returned ~10%* p.a. annualised over the last 20 years, the first rule in investing is that past performance does not guarantee future returns.

*As of May 2025 i.e. returns are from 2005.

The second thing that many folks tend to overlook is the forex exposure risk. It can be easy to forget about that when the USD-SGD rate has generally been strong over the last decade; but older, wiser investors may tell you otherwise:

As recent events have shown, investing in USD when your expenses and cost of living are in SGD may not always be a wise choice.

USD Returns, SGD Bills

Let’s talk about the elephant in the room. Most of us spend in SGD. Our mortgages, groceries, kopi money—everything is priced in local currency.

If all your investments are in USD, you might be taking an excessive amount of currency risk without even realising it! This hit home for me during the market correction in April 2025. If you had invested in the S&P 500 and someone else had invested in the STI, you might be surprised to find that your US investments actually delivered lower returns after converting it back to SGD—thanks to the weakening of the USD.

Here’s the illustrated calculations:

Further reading: During the recent April 2025, you would have made more money as a Singapore investor if you had chosen to invest in a local ETF tracking the STI over a US ETF tracking the S&P 500. 

Unlike the US Fed which adjusts interest rates, our Monetary Authority of Singapore (MAS) doesn’t manage monetary policy that way. Instead, our central bank uses exchange rate policy where it adjusts the strength of SGD to combat imported inflation and manage our export prices.

Instead of changing interest rates, MAS manages the exchange rate of the SGD. Specifically, MAS looks at how the SGD performs against a basket of other major currencies (like USD, MYR, CNY, etc). This is known as the Nominal Effective Exchange Rate (NEER). This determines how strong or weak SGD is compared to a group of currencies that matter to us—usually from countries we trade a lot with.

Read more here: Singapore's Exchange Rate-Based Monetary Policy

That’s why, the SGD has remained strong over the years vs. many other currencies.

In recent months, you might have heard about the theme called “De-dollarisation” – which refers to the trend of investors moving away from the USD and USD investments. This has led to the devaluation of the USD, which creates a double-whammy effect as the USD weakens while SGD strengthens.

In other words, what does that mean for me as a Singaporean investor? If our investments are in USD but our bills are in SGD, that’s not the wisest plan.

What happens when we invest in US ETFs as a Singaporean investor?

If you’re new to exchange traded funds (ETFs)—they’re basically a basket of stocks that track a specific index. They’re usually passive, low-cost, and self-correcting. When poor-performing companies drop out of the index, they get replaced by better ones. You don’t need to stock pick or continuously monitor the market for individual stock performance.

But here’s the thing: not all ETFs are created equal.

Table: Author’s own compilation. 

*Note that for currency risk, SGD-denominated ETFs that have underlying investments in overseas listing venues are not spared from foreign currency exchange fluctuations, however, ETF managers that offer a SGD-hedged share class (such as the Amova E Fund ChiNext Index ETF) help SGD investors mitigate FX risks.

As you may know by now, the majority of US-listed ETFs are in USD. If the USD weakens against SGD (which has been happening), your returns get eroded when you convert back.

And if you’re investing for the long run, holding over USD 60,000 in US-domiciled assets (including US ETFs) leaves you at risk for estate tax implications. Should you pass away, your estate is subject to up to 40% of your investment, leaving your loved ones with lesser to inherit.

What’s more, US-listed ETFs also come with a 30% dividend withholding tax for non-US residents. Imagine being paid $1,000 in dividends, but only receiving less than $700 after accounting for taxes and your brokerage’s foreign dividend-handling fees. While some savvy investors bypass this by opting for Irish-domiciled versions like CSPX for tax efficiency (drops to 15% withholding tax instead of 30%), even such a move cannot eliminate your currency risk.

What’s one way to avoid that risk altogether?

Look for ETFs that trade in SGD.

Investing as a Singaporean

Many Singapore investors naturally gravitate towards the S&P 500 and US-listed ETFs when starting their investment journey. After all, these funds are more well-known and widely talked about online by foreign finance creators as compared to coverage on our local market.

But that doesn’t mean you should skip on investing in your home country entirely. Nor does it mean that Singapore isn’t an attractive place for returns.

The good news is, Nikko AM (soon to be renamed Amova Asset Management) has an entire suite of ETFs primarily designed for Singapore-based investors like you and me.

Some of their key ETFs include:

• Nikko AM Singapore STI ETF: Exposure to Singapore’s 30 biggest companies
• Nikko AM SGD Investment Grade Corporate Bond ETF: For investors seeking income¹ and medium to long-term capital preservation
• ABF Singapore Bond Index Fund: Tracks Singapore government bonds, one of the most stable of the lot
• NikkoAM-StraitsTrading Asia ex Japan REIT ETF: Exposure to regional REITs and popular among dividend-seeking¹ investors
• Amova MSCI AC Asia ex China Index ETF: more flexible allocation to the bright spots in Asia e.g. India, Korea, Taiwan and Asean
• Amova E Fund ChiNext Index ETF (SGD-hedged): Ride on the growth of the Chinese market, but with a SGD hedge to moderate against volatility and the RMB-SGD

Nikko AM’s new Amova E Fund ChiNext Index ETF is a great example—they didn’t just slap a Chinese index on an ETF and call it a day. They went a step further to hedge it in SGD for us, and that’s rare.

Note: having a SGD-hedge does not remove FX risks 100%, but it does help to mitigate a good portion of it vs. having the investment in RMB.

Over the last 3 decades, they have expanded their ETF offerings to the point where an investor today can even build an entire core-satellite ETF portfolio with their products! Whether you’re looking for exposure to equities, bonds, certain sectors or even to tap on growth in China, there’s a ETF for that.

With this mix, you can get diversification in both bonds and equities across the Asia market, while staying fully invested in SGD.

No need to worry about the USD depreciating.

No surprise tax implications.

Designed with the Singaporean investor in mind.

Conclusion

The ETF investing scene has changed drastically in the last decade, with new funds offering us more access to different markets and themes today.

At the same time, investors should be aware of key risks and considerations associated with each of these ETFs. Market volatility, interest rate changes and forex fluctuations can affect an ETF’s performance and lead to potential capital loss. While diversification reduces risk, it doesn’t eliminate it entirely – economic downturns or industry declines can still impact performance.

And more importantly, a globally diversified investment portfolio doesn’t have to be 100% in foreign currencies.

I’m not saying to never invest in the S&P 500 or overseas ETFs. There’s a place for them in every globally diversified portfolio, and even for myself, I own both overseas ETFs and local ones.

But what I am saying is, don’t ignore the forex risk. Especially not now, when the USD is showing signs of weakness.

When you live, spend and pay your bills in SGD, you should think about how your investment portfolio is catering for that.

So look beyond “just the S&P 500”, and start by making sure your core investments include locally-domiciled SGD ones.

P.S. From 1 September 2025, Nikko Asset Management will be rebranded as Amova Asset Management. Same trusted team, new name. “Amova” combines “Alpha” and “Move” – a nod to their goal of helping you move ahead in your financial journey with smarter investing.

1 Distributions are not guaranteed and are at the absolute discretion of the Managers. If the investment income is insufficient to fund a distribution for the Fund, the Managers may determine that such distributions should be paid from the capital of the Fund. Any distribution is expected to result in an immediate reduction of the Fund’s net asset value per unit. Please refer to the respective Fund prospectus and Product Highlights Sheet for further details.

Disclosure: This post is brought to you in collaboration with Nikko Asset Management. All research and opinions are that of my own, and should not be taken as financial advice for your specific situation(s) as I know nothing about your individual financial circumstances, risk tolerance or investment objectives. I highly recommend that you use this as a starting point to understand more about the various ETFs offered by NikkoAM which you can use for SRS investing, and then click into the respective links above to retrieve the fund prospectus and performance so as to help you decide whether it fits into your investment objectives 

Important Information by Nikko Asset Management Asia Limited and Nikko AM Asia Limited VCC:   
The NikkoAM-StraitsTrading MSCI China Electric Vehicles and Future Mobility Index ETF, Amova MSCI AC Asia ex Japan ex China Index ETF, and Amova E Fund Chinext Index ETF are sub-funds of Nikko AM Asia Limited VCC, an umbrella variable capital company incorporated in Singapore. These funds are managed by Nikko Asset Management Asia Limited.

This document is purely for informational purposes only with no consideration given to the specific investment objective, financial situation and particular needs of any specific person. It should not be relied upon as financial advice. Any securities mentioned herein are for illustration purposes only and should not be construed as a recommendation for investment. You should seek advice from a financial adviser before making any investment. In the event that you choose not to do so, you should consider whether the investment selected is suitable for you. Investments in funds are not deposits in, obligations of, or guaranteed or insured by Nikko Asset Management Asia Limited (“Nikko AM Asia”).   
Past performance or any prediction, projection or forecast is not indicative of future performance. The Fund or any underlying fund may use or invest in financial derivative instruments. The value of units/shares and income from them may fall or rise. Investments in the Fund are subject to investment risks, including the possible loss of principal amount invested. You should read the relevant prospectus (including the risk warnings) and product highlights sheet of the Fund, which are available and may be obtained from appointed distributors of Nikko AM Asia or our website (www.nikkoam.com.sg) before deciding whether to invest in the Fund.   
The information contained herein may not be copied, reproduced or redistributed without the express consent of Nikko AM Asia. While reasonable care has been taken to ensure the accuracy of the information as at the date of publication, Nikko AM Asia does not give any warranty or representation, either express or implied, and expressly disclaims liability for any errors or omissions. Information may be subject to change without notice. Nikko AM Asia accepts no liability for any loss, indirect or consequential damages, arising from any use of or reliance on this document. This advertisement has not been reviewed by the Monetary Authority of Singapore.    
The performance of the ETF’s price on the Singapore Exchange Securities Trading Limited (“SGX-ST”) may be different from the net asset value per unit/share of the ETF. The ETF may also be suspended or delisted from the SGX-ST.   Listing of the units/shares does not guarantee a liquid market for the units/shares. Investors should note that the ETF differs from a typical unit trust and units/shares may only be created or redeemed directly by a participating dealer in large creation or redemption units/shares.
The Central Provident Fund (“CPF”) Ordinary Account (“OA”) interest rate is the legislated minimum 2.5% per annum, or the 3-month average of major local banks' interest rates, whichever is higher, reviewed quarterly. The interest rate for Special Account (“SA”) is currently 4% per annum or the 12-month average yield of 10-year Singapore Government Securities plus 1%, whichever is higher, reviewed quarterly. Only monies in excess of $20,000 in OA and $40,000 in SA can be invested under the CPF Investment Scheme (“CPFIS”). Please refer to the website of the CPF Board for further information. Investors should note that the applicable interest rates for the CPF accounts and the terms of CPFIS may be varied by the CPF Board from time to time.
The units of Nikko AM Singapore STI ETF are not in any way sponsored, endorsed, sold or promoted by FTSE International Limited ("FTSE"), the London Stock Exchange Plc (the "Exchange"), The Financial Times Limited ("FT") SPH Data Services Pte Ltd ("SPH") or Singapore Press Holdings Ltd ("SGP") (collectively, the "Licensor Parties") and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Straits Times Index ("Index") and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTSE. None of the Licensor Parties shall be under any obligation to advise any person of any error therein. "FTSE®", "FT-SE®" are trade marks of the Exchange and the FT and are used by FTSE under license. "STI" and "Straits Times Index" are trade marks of SPH and are used by FTSE under licence. All intellectual property rights in the ST index vest in SPH and SGP.
The units of NikkoAM-StraitsTrading Asia ex Japan REIT ETF are not in any way sponsored, endorsed, sold or promoted by FTSE International Limited ("FTSE''), by the London Stock Exchange Group companies ("LSEG''), Euronext N.V. ("Euronext"), European Public Real Estate Association ("EPRA"), or the National Association of Real Estate Investment Trusts ("NAREIT") (together the "Licensor Parties") and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE EPRA/NAREIT Asia ex Japan Net Total Return REIT Index (the "Index") and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTSE. However, none of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. "FTSE®" is a trade mark of LSEG, "NAREIT®" is a trade mark of the National Association of Real Estate Investment Trusts and "EPRA®" is a trade mark of EPRA and all are used by FTSE under licence."
Neither Markit, its Affiliates or any third party data provider makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data. Neither Markit, its Affiliates nor any data provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the Markit data, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom. Markit has no obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate. Without limiting the foregoing, Markit, its Affiliates, or any third party data provider shall have no liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgments, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein. Copyright © 2024, Markit Indices Limited.
The Markit iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index are marks of Markit Indices Lmited and have been licensed for use by Nikko Asset Management Asia Limited. The Markit iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index referenced herein is the property of Markit Indices Limited and is used under license. The Nikko AM SGD Investment Grade Corporate Bond ETF is not sponsored, endorsed, or promoted by Markit Indices Limited

Nikko Asset Management Asia Limited. Registration Number 198202562H. 
Nikko AM Asia Limited VCC. Registration Number T21VC0223L.