Get set for a liquidity rally - the DBS Vickers Securities Equities ...

Regional ETF Focus
Get set for a liquidity rally
DBS Group Research Equity 21 Oct 2010
In search of higher yields
• QE2 will probably be announced on November 3
• Asia markets are benefiting from ample liquidity
but impact to be short-lived
• Improving US growth outlook brought about by
QE2 to keep markets firm
• Reflationary trade is back – commodity and
property are prime beneficiaries
• Look for valuation gaps to secure upside
As the G3 central banks continue to push for QE2, the
flood in liquidity will continue to search for higher yielding
assets. Asia equities market will be the choice destination
for liquidity flows on relative growth appeal.
Fig. 1 Asia 10 – rise in FX reserves as % of GDP
annual, official + fwd commitments, 2010 is DBS estimate
14
12
10
8
6
4
2
0
3
0
2
3
2 2
0
3 3
2
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Source: CEIC, DBS
Fig. 2: Asia ex-Japan price to book and 12-month forward
return
(x)
1.00
1.20
2
5
7
8
5
7
10
4
9
(%)
12
100
80
However, we caution against excessive optimism as the
sustainability of the rally will very much depend on an
improving US growth outlook. The relief from an
improving growth outlook from a “bad” to a “less bad”
outlook is driving the rally and we think more optimism will
needed to sustain it. Improving US unemployment rates
and housing market will be pre-requisites for a better
outlook.
1.40
1.60
1.80
2.00
2.20
2.40
2.60
60
40
20
0
-20
-40
-60
With or without “QE”, the trade will still be “buy Asia and
emerging markets”, and investment flows will continue to
be attracted into this region. Reflation will be the key
theme from QE2. Key beneficiaries are commodities and
property.
2.80 -80
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
ASIA EX JAPAN-DS Market - PRICE/BOOK RATIO (REVERSE SCALE)
12M FORWARD RETURN (R.H.SCALE)
Source: DATASTREAM
Source: Datastream, DBS
We are conservatively forecasting a12% return based on
growth forecasts and sustainable average valuations of 14-
16x for Asia ex-Japan equities for the next 12 months.
Earnings surprise and liquidity flows could possibly improve
returns, but we think the lack of direction at this stage
suggests near term volatility.
Regional Equity Strategist: Joanne Goh (65) 6878-5233 joannegohsc@dbs.com
www.dbs.com
Refer to important disclosures at the end of this report
Ed: MY / sa: TW

Regional ETF Guide
Get set for a liquidity rally
In search of higher yields ( Joanne Goh, joannegohsc@dbs.com)
The impact from QE2 is two fold, both of which are positive
for equities. Firstly, the markets will be flushed with liquidity.
Asian assets thriving under higher economic growth rates,
attractive yield gaps and currency appreciation are
destinations of choice. Secondly, Fed’s policy of inflation
targeting should favour equities as an asset class as a
=beneficiary of reflation.
2011 – a liquidity driven year ….
As in 2009 when the Fed and major central banks were
committed to asset purchases, we believe 2011 will be
another liquidity driven year. With the possible US$1 trillion
targeted for asset purchases, which is sizeable compared to
US$1540bn previously pumped in, we expect Asia equities
to benefit from the liquidity flows.
Indeed Asia markets were up by close to 100% from QE1
(March 08 – 1Q10). Since then Asia markets have been in a
tight trading range, and only broke out of the 6-month
trading range when signs of a possible QE2 emerged in
September.
Asia and US market performance with timeline of QE1
100
90
80
70
60
50
40
Nov '08:
MBS
purchase
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
Source: Datastream, DBS
Q1'10: QE1 complete
Mar '09: Expand MBS
program to $1.25t and
US$300b LT secs
MSCI Asia ex-Japan S&P 500
Fundamentals needed for follow through
Most liquidity rallies which were not supported by
fundamentals ended in tears as in 1993, 1997 and 2007.
The sudden outflow of liquidity driven by monetary
tightening (1994), overheating and leading to hedge funds
speculative attack (1997), and overheating leading to credit
crisis (2007) were the main reasons in the sudden change in
sentiment.
Possible speed bumps ahead
We do not believe the markets will rise in a straight line next
year, as what was witnessed during QE1. Firstly, the
uncertainty in the US growth outlook is still threatening the
global recovery. Whether this is a pure liquidity rally or that
supported by earnings growth remains to be seen. Since the
rally to 11000 on the Dow, markets are refocusing yet again
on the corporate earnings season ahead. The outlook for
earnings growth is conservative, and upside risk remains to
be seen.
Secondly, the Japan experience of a long-term deflationary
environment has raised concerns as to whether QE2 will
really work in stemming deflationary fears. But who wants a
lost decade It is generally believed that G3 central banks
will avoid that scenario. The central bank “put“ is powerful
enough to institute the belief that liquidity will be there for
the long term.
Thirdly, the weak USD outlook (as a result of QE2) is leaving
uncomfortable reminiscences that the liquidity rush involves
a lot of carry trades and speculative positions in risky assets,
as in 2007. There is higher inflationary pressure stemming
from competition from foreign money for goods, such as
property and discretionary items; and rising commodity
prices as a result of excessive speculation. The side effects of
the increased capital flow on the real economy cannot be
ignored.
Fourthly, on the financial markets, rising valuations as a
result of liquidity flows will lead to extended valuations.
However valuations are subjective and everything looks
cheap if the cost of capital is zero!
Bond market bubble but not equities .. current valuations
are sustainable and has room for re-rating
There are reasons to believe that liquidity flows are
benefiting the bond market more than the equities markets
in the past six months. We have seen falling bond yields and
currency appreciation but no re-rating in P/E valuations. Net
foreign buying amounted to about US$712m a day (daily
average since September) based on the 6 countries
(Thailand, Indonesia, Philippines, Korea, Taiwan and India)
where official data are available. However, the amount
bought to date barely covers what was sold off during the
financial crisis.
Page 2

Regional ETF Guide
Get set for a liquidity rally
Cumulative net foreign inflow
US$bil
160
140
120
100
80
60
40
20
0
-20
03 04 05 06 07 08 09 10
Source: Datastream, DBS
As a classic example, DBS fixed income strategist argues that
the Indon bond market has extended beyond its
fundamentals as the yield curve is too flat( see “Indonesia
interest rate strategy: inflows drown fundamentals”, Jens
Lauschke, 9 October 2010, included in this report), while
DBS economist thinks that the economy is not yet
overheated ( see “Indonesia: inflows & monetary policy”,
Ma Tieying, 13 October 2010, included in this report) .
Meanwhile, the Indonesia P/E is capped at 14x, which is
within its long-term re-rating trend. It was only very recently
that equity flows exceeded bond flows with the equities
market going past 14x P/E. Hence, we believe current
valuations are sustainable for Asia markets and has room for
re-rating.
Foreign flows into Indonesian stock and bond markets
IDR trillion
25
20
15
10
5
0
-5
-10
Bonds
Stocks
Jun-09 Dec-09 Jun-10 Dec-10
Source: CEIC
Asia valuations cheap on PEG and P/E, expensive on
P/B
Valuations in Asia can be argued as cheap when using the
PEG model. It stands at 0.86x, which is still about 10%
below historical average of 0.95x. This corresponds with
Asia being a growth region, and the higher valuations
(when compared to the US) are justified. However when
using the P/B model, which is more of a predictive model for
12-month return, Asia ex-Japan is extremely expensive!
Asia ex-Japan PEG ratio
(x)
2.5
2
1.5
1
0.5
0
N/A
due to
ve gro
93 95 97 99 01 03 05 07 09
Source: Datastream, DBS
Asia ex-Japan 12-month forward P/E
(x)
21
19
17
15
13
11
9
7
00 01 02 03 04 05 06 07 08 09 10
Source: Datastream, DBS
Earnings growth supports only 12% return for 2011
With valuations at fair levels and 12% earnings growth for
2012 (we use a forward P/E model), return expectations for
Asia equities are conservative at 12% for 2011. Ample
liquidity will push valuations higher.
Page 3

Regional ETF Guide
Get set for a liquidity rally
On stretched valuations to +1SD of 10-year average
valuations, potential returns can be 17% from current
levels. That said re-rating drivers from liquidity will render
valuations expensive. We believe rotational interest into
value laggards will bring about the re-rating, and a
convergence towards 14x P/E will be the likely re-rating
path. We thus prefer Thailand and Korea as potential
candidates for re-rating, Indonesia and China for growth
surprises.
We are underweight in Taiwan on potential earnings
disappointment and India on de-rating from higher
valuations.
High price to book will cap upside
One reservation we have for more upside is high price to
book value multiples.
Our valuation study has found that price to book is one of
the better indicators for projecting 12-month forward
returns. Current levels indicate a negative return for the next
12 months.
Asia price to book vs 12-month forward performance
1.00
1.20
1.40
1.60
1.80
2.00
2.20
2.40
2.60
(x)
2.80 -80
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
ASIA EX JAPAN-DS Market - PRICE/BOOK RATIO (REVERSE SCALE)
12M FORWARD RETURN (R.H.SCALE)
Source: Datastream, DBS
(%)
100
80
60
40
20
0
-20
-40
-60
Source: DATASTREAM
Upside surprise from growth needs further catalysts
At this juncture we do not see upside surprise from growth
projections. After a strong economic year in 2010, DBS
economist refers to next year’s growth as more normalised
with a return to growth trend. A gloomy outlook for the US
and Europe hinders a more optimistic outlook for the
region.
QE2 and reflation
We believe the direct beneficiaries for QE2 will be
commodities and properties. QE2 will help bring interest
rates down with the purchase of long term securities. At
Asia market economic growth and earnings growth
forecasts
GDP growth, % YoY Earnings growth, % YoY
2010f 2011f 2010f 2011f
US 2.8 2.4 39.7 13.8
Japan 2.7 1.6 79.5 17.1
Eurozone 1.7 1.5 35.3 16.0
Indonesia* 6.0 5.8 17.3 14.6
Malaysia* 8.0 5.5 16.8 14.3
Philippines 6.2 5.0 22.3 12.4
Singapore* 15.0 4.5 18.8 12.8
Thailand* 9.0 4.0 19.5 13.9
China* 10.0 9.5 13.9 11.8
Hong Kong* 7.0 4.5 15.8 13.7
Taiwan 9.5 3.8 90.3 9.2
Korea 6.2 3.9 55.3 6.3
India 8.8 8.5 23.4 22.3
Source: DBS forecasts (GDP), IBES (earnings growth) except for
markets marked with *s which are DBSVickers coverage.
Earnings growth for Hong Kong refers to HSI and China refers
to H-share universe
the same time with inflation targeting real interest rates will
also fall. Commodities are good inflation and weak USD
hedge. But we are selective on Asia property sector as an
inflation hedge due to tightening fears in Asia.
Interest rate tightening in Asia, however
In Asia interest rate hikes will be the main concern. In 3Q10,
Asia central banks showed their confidence on growth with
rate hikes. Due to very strong domestic demand and
inflows, inflation in Asia continued to rise, pressurising
central banks to raise raises.
DBS economists believe that rate hikes will continue in
4Q10. Singapore tightened its grip on monetary policies by
steepening and widening the SGD NEER currency band to
allow for more and faster appreciation in early October.
That was followed by RRR hikes and interest rate hikes in
China. We expect most other Asia countries to follow suit.
That said, the strategy team believes that Asia central banks
are facing a dilemma in balancing growth and inflation. As
such a rate hike should signal confidence rather being seen
as restrictive on growth. On the other hand, central banks
might send the wrong signal if rates are not raised, either
being perceived as non-independent or too complacent, or
lack of confidence in growth.
Interest rate normalisation, at least hiking towards mid point
of the precrisis level, should be taken as a healthy move
towards prevention of a build up of inflationary
expectations. The strategy team believes most Asia countries
will slow the interest rate normalisation process.
Page 4

Regional ETF Guide
Get set for a liquidity rally
Table of Contents
In search of higher yields 2
Asia economic focus: another day, another
$2bn inflow 6
Forex: Pause first 9
Asia equity ETF Investment ideas 11
Singapore-listed ETFs at a glance 13
Hong Kong-listed ETFs at a glance 14-15
Singapore market outlook 16
Hong Kong / China market outlook 18
China economic outlook: 21
Forex: Chinese yuan 23
India market outlook 24
India economic outlook 25
Korea market outlook 28
Korea economic outlook: 29
Taiwan market outlook 32
Taiwan economic outlook 33
Indonesia market outlook 36
Indonesia economic outlook 38
Indonesia interest rate strategy 41
Thailand market outlook 43
Malaysia market outlook 45
Page 5

Regional ETF Guide
Get set for a liquidity rally
Asia economic Focus: another day, another $2bn inflow (David Carbon,
davidcarbon@dbs.com, re-published from same name report, 1 October)
• Since Apr09, inflows have been pouring into Asia to
the tune of $2bn per day. Foreign reserves have risen
by $962bn, or 13% of GDP, significantly faster than
any time in history
• It is no coincidence that, over the same time period,
the Fed injected $1500bn of liquidity into markets via
purchases of Treasuries and housing securities (MBS
and agency paper)
• Washington howls at currency intervention. But
quantitative easing and currency intervention are both
just liquidity injections. Who’s really intervening, the
Fed or Asia
• With QE1 inflows not having run their course and QE2
already in the wings, talk of “one-way bets” in Asian
markets is on the rise. Appropriately so
The world may or may not be at war on the currency front.
But, as Milton Friedman said, it’s the “as if” part that
matters. The pool shark may not know a thing about the
laws of physics but if he plays as if he does, he can make a
lot of waves. Thus the Fed pushes the dollar down with
$1.5 trn of quantitative easing between Mar08 and Mar09
(QE1). Japan pushes back by intervening in currency
markets. Washington cringes: QE is kosher, CI (currency
intervention) is not. The Fed counters, all but announcing
QE2, another $500bn to $1000bn of liquidity injections.
Japan recoils, but creatively. If CI is out, no problem: it
prepares its own QE and fingers the trigger. If Bernanke
launches, the BoJ will too, before the Fed’s missles can land.
CI, as Japan has so aptly shown, is not very much in
practical terms. Both inject liquidity into the larger pool of
wet stuff that flows across all markets – they just do it via
different doors. But plainly, the water’s just as high on the
currency side of the pool as it is on the money/bond side of
the pool. The only difference between QE and CI would
seem to be the time it takes for the water to flow from one
side of the pool to the other. And in today’s high-tech
markets packed with all kinds of traders, that’s not very
long.
Liquid is as liquid does
By hook or by crook – QE or CI – the Fed is flooding markets
with liquidity, Japan is flooding the markets with liquidity
and the UK is flooding markets with liquidity. The trouble
is, a lot of that money isn’t staying where it was put.
Growth in the G3 is subpar and most expect it to remain
that way for a couple years if not for longer. So a big chunk
of those G3 injections is heading for other shores, where
growth and returns are expected to be higher.
A lot of it has gone to Asia, and for good reason. Asia
didn’t stop growing just because the US and Japan and
Europe did. Output (GDP) in Asia is 10% higher than it was
in 3Q08. Consumption (private) is 18% higher than it was
in 3Q08. In the G3, consumption has not grown a bit.
Other things equal, faster growth means higher returns and
it’s little wonder that that a lot of that G3 liquidity is flowing
to Asia in an attempt to capture them.
Real global consumption
Asia 10: Equity markets
3Q08=100, seas adj
simple avg of Asia-10 national indices, Jan08=100, weekly data, eop [1]
110
Nov07: 104
100
Oct10: 102.8
120
116
Asia-10
90
112
80
70
60
50
40
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Mutually assured destruction Not if you’re an Asian equity
market. In fact, a lot of investors are saying, if this is war,
bring it on. Why Because the difference between QE and
108
104
100
96
Sep-
08
Dec-
08
Mar-
09
Jun-
09
Sep-
09
The growth that
came "from
nowhere"
Dec-
09
Mar-
10
Jun-
10
US, JP
EU16
Page 6

Regional ETF Guide
Get set for a liquidity rally
Momentum
In the short-run, everyone succeeds. As the chart on the
page 1 shows, equity markets have, on average, risen by
20% since May (and 16% since the start of the year).
Markets have doubled in value since early-2009, on average,
and are now only about 1% shy of fully recovering their
pre-crisis highs of Nov07.
Asia – currency appreciation
%, 2010 to date
10 9 9
9
8
7
6
5
4
3
2
1
0
6
6
5
MYR THB SGD PHP IDR INR TWD KRW CNY
As one would expect, and much to the chagrin of local
central banks, currencies are appreciating too. Since
January, Asian currencies have risen by 6% on average
4
4
3
2
against the dollar. The ringgit and baht are leading the
region with year-to-date appreciation of 9%, followed by
the Singapore dollar the Philippine peso (6%), the rupiah
(5%) and the rupee, won and TWD at about 4%. China
continues to intervene the most in currency markets
allowing only 2% appreciation of the yuan against the
dollar this year.
Who’s “intervening”: Asia or the Fed
China’s intervention in currency markets is of course the
source of much irritation to US politicians. How much
intervention has there been Since April of 2009, when
inflows into Asia really started to pick up, China’s foreign
reserves have risen by some $535bn. That’s a little more
than half (56%) of the total increase in foreign reserves
($962bn) by Asia’s central banks since then (chart below
left).
That’s a lot of inflow and a lot of intervention – $2bn per
day to be precise and and it works out to some 13% of one
year’s GDP for Asian economies on average (chart below
right). It’s easy to see why Asian markets are rising and why
Asian currencies are rising. And why US politicians are a
little piqued.
Asia – rise in foreign reserves
g
USD bn, including fwd commitments, Apr09-Aug10 [2]
600
535
500
400
300
200
118
100
77 68 67
44
27 21
6
0
CH KR SG HK TW TH PH ID MY
Asia – rise in foreign reserves
g
% of GDP, including fwd commitments, Apr09-Aug10 [2]
35 33
30
25
24
20
15
13
12 12
11
10
8
5
3 2
0
SG HK TW TH PH KR CH ID MY
Page 7

Regional ETF Guide
Get set for a liquidity rally
But should they really be upset If you take the view that
QE and CI (currency intervention) are both just liquidity
injections the question then becomes: who is really
intervening, the US or China/Asia The answer is a lot less
clear than what you’d gather from reading the papers every
day.
Between Feb09 and Aug10, the Fed pumped $1540bn into
markets via its purchases of Treasuries and housing
securities (MBS+agency paper). Since Apr09, Asia’s foreign
reserves have soared by $962bn. Not only is the Fed’s
intervention $600bn larger than Asia’s, but Asia’s chicken
sure looks to have hatched from the Fed’s egg.
One way bet
Irrespective of who’s doing the intervening, Asia is being
inundated with inflows. At 13% of GDP on average, the
accumulation of foreign reserves is significantly higher than
at any time in history (chart below). That includes the early-
90’s when foreign inflows into Asia led to soaring equity
markets, too-low interest rates, high leverage, over
investment, excess capacity, property bubbles and ultimately
the blowout known as the Asian financial crisis of 1997/98.
Asia 10 – rise in FX reserves as % of GDP
annual, official + fwd commitments, 2010 is DBS estimate
14
12
10
8
6
4
2
0
3
0
2
3
2 2
0
3 3
2
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
In previous research [3], we argued at some length that the
next 5-10 years in Asia is likely to look very much like the 5-
10 years that led up to the Asian financial crisis. Much of
the reason, we argued, was that inflows into Asia seemed
likely to rise sharply, partly due to long-term “structural”
reasons (Asia is where the world’s new demand is being
generated) and partly for cyclical reasons – namely, the
outflow of G3 QE quantitative easing programs into higher
yielding economies / regions such as Asia.
2
5
7
8
5
7
10
4
9
12
Without a doubt, the cyclical flows have been more
aggressive than even we imagined a year ago. And with the
US, Japan and England now on the verge of another round
of QE it is little wonder that most strategists now predicts
further gains in Asian equities, bonds and currencies. Who
would dare stand in the way of a QE2 freight train pointed
straight down the tracks at Asia when the effects of QE1
have yet to run their course Most seem happy to climb
aboard what is increasingly regarded as a one-way bet.
Of course one-way bets never stay that way forever. And,
yes, they often end in tears. But our view, expressed a year
ago [3] is that Asia has spent the last ten years deleveraging
and thus seems well placed to weather a multi-year period
of re-leveraging. And though it is true that things are
developing more rapidly than we imagined a year ago, it
still seems as though this train has barely left the station.
With the trillions of dollars of QE1 coal yet to be burned
through and another trillion of QE2 seemingly on the way,
it’s surely going to take more than a few weeks or months
or quarters before this train comes to rest.
Notes
1. Asia10: CH, HK, TW, KR, SG, MY, TH, ID, PH, IN
2. “Effective reserves” include not just actual dollar holdings
but also commitments to purchase dollars at a future date in
the forward market. Such intervention is now reported by
most IMF member countries as part of the reforms
introduced in the aftermath of the Asian financial crisis of
1997/98. Forward market intervention has the same impact
on the currency as spot purchases even though it does not
(yet) appear in official reserve figures. This earlier lack of
transparency was judged to have contributed to the crisis,
particularly in the case of Thailand, where reported reserves
appeared substantial but were, in effect, already zero
because they had been sold forward in the forward currency
market.
3. “Asia-vu: back to the ‘90s”, DBS Economics-Markets-
Strategy, 17Sep09.
Page 8

Regional ETF Focus
Get set for a liquidity rally
Forex: Pause first (Philip Wee, philipwee@dbs.com, re-published and extracted from same name report in “
Economics-Markets-Strategy, 11 Sep 2010)
November is an important month
The most important month in 4Q 2010 is probably
November, which houses many key events that look set to
politicize the Chinese yuan issue again. Unlike June, there
appears to be a bias by the US and other major economies
to lean towards the carrot rather than the stick to achieve
more progress on the yuan.
• US Treasury Currency Report (mid-October)
The semiannual Currency Report was last delayed in
April to “encourage” China to free its yuan from the US
dollar. China announced yuan reforms on June 19 to
introduce flexibility into its exchange rate. The Treasury
finally released the report on July 8 without naming
China a currency manipulator.
The next Currency Report is unlikely to be released on
schedule in mid-October owing to the US midterm
elections. China is unlikely to be named a manipulator
when it is eventually published. The Ministry of
Commerce in China has already started to take steps to
increase imports. The USD/CNY trading band is also
likely to be widened nearer the G20 summit.
• US midterm elections (November 2)
According to US undersecretary of State Robert Hormats
on September 3, US lawmakers have become impatient
with a lack of progress by China to address currency and
trade issues. With the economy and jobs topping voter
concerns ahead of the US midterm elections in
November, risks have increased for US lawmakers to
become more protectionist.
A key committee in the US House of Representatives is
scheduled to hold a hearing on September 15 to
determine if the undervalued yuan has provided unfair
advantages to Chinese companies against US Inc. Owing
to their interdependency, Washington and Beijing are
likely to continue cooperating to avoid the political
pitfalls linked to legislation.
• G20 summit (November 11-12)
Unlike the last G20 summit in June, the US is unlikely to
strongly rally emerging countries to pressure China on
the yuan. First, emerging countries are less tolerant of
currency appreciation because of the second half
slowdown story amidst concerns that US double-dip
recession risks are no longer zero. Second, the IMF fiveyear
review, which is likely to be held alongside the G20
summit, is expected to boost the voting power of
emerging economies. The job now is to persuade China
to live up to its global responsibility to address
imbalances with its new clout.
Looking ahead, the G20 summits in 2011 have more
scope to renew the dollar’s depreciation. France, who
will be assuming the G20 presidency in 2011, has voiced
its desire to reform the current international monetary
system modelled around the US dollar to reflect an
increasingly multipolar global economy.
• IMF five-year review (November)
According to IMF managing director Dominique Strauss-
Kahn on June 27, the increase in China’s voting power
in the IMF is expected to be “rather big”. An agreement
to shift more (5% or more) voting power in the IMF to
under-represented emerging economies was reached at
the G20 summit in late September 2009. This was the
summit that formalized the G20 as the world’s premier
economic forum.
Compared to a year ago, Eurozone no longer appears as
keen to share power in the IMF today. After the EU
fiscal/debt crisis in 2Q, Eurozone was unhappy that the
US placed its recovery over EU’s need to emphasize fiscal
austerity, as well as China’s slow progress in allowing
yuan appreciation. Nonetheless, Eurozone is expected to
eventually honor its earlier commitment. If so, China is
expected to overtake France and UK to become the
fourth loudest voice in the IMF, after the US, Japan and
Germany.
Page 9

Regional ETF Focus
Get set for a liquidity rally
More flexible CNY is also USD – sensitive
Voting power in IMF – SDR vs BRIC economies
90
6.84
25
% of total votes
88
86
84
82
DXY (USD) index
(lhs)
USD/CNY (rhs)
6.83
6.82
6.81
6.80
6.79
6.78
20
15
10
19.55
16.77
SDR: EUR, USD, JPY, GBP
BRIC: CNY, RUB, INR, BRL
80
78
76
Jan-10 Mar-10 May-10 Jul-10 Sep-10
6.77
6.76
6.75
6.74
5
0
6.02
4.86
3.66
2.69
1.89
1.33
EU US Japan UK China Russia India Brazil
The yuan is, however, unlikely to be included in the
Special Drawing Right (SDR) for this IMF review. The
yuan needs to be closer to the SDR basket of currencies
(US dollar, euro, British pound and the Japanese yen) in
two regards. The yuan needs to be more marketdetermined
and more convertible on the capital account.
4Q 2010 – a tough transition towards a sustainable
global recovery
In summary, the final quarter is likely to comprise two halves.
Until economic data improves, especially for the US, global
slowdown worries should dominate and support the US
dollar as a safe haven currency.
China’s foreign reserves breakdown
November should be closely watched as a potential turning
point for the US dollar to depreciate again. Hopefully by
then, most economies would have exhibited signs of
returning to a more sustainable moderate growth path,
preferably with China allowing more yuan appreciation. If so,
this should set the stage for risk appetite to return on the
back of a broad-based depreciation in the US dollar.
If 2009/10 was about emerging from the (US/EU) global
crisis, 2011 and the next few years will be about moving
towards a more sustainable global recovery. When this
happens, expect more diversification out of US dollars.
Weights of basket currencies in SDR
GBP, 5%
JPY, 3%
JPY, 15%
EUR, 26%
GBP, 10%
USD, 45%
USD, 65%
EUR, 29%
Sources:
Sources for all charts and tables are Bloomberg . Forecasts are DBS Group Research.
Page 10

Regional ETF Focus
Get set for a liquidity rally
Asia equity ETF Investment ideas (Joanne Goh, joannegohsc@dbs.com)
Over the last two months mid caps stocks have stolen the
limelight. Big caps and main indices were stuck in a trading
range as broad macro factors were uncertain and lagging in
performance.
We believe that as the uncertainty dissipates, coupled with
the liquidity boost by central banks, large caps will have a
lot of catch up to do.
We recommend buying into ETFs to capture the upside as
the equities market recovery becomes broad based. QE2 will
probably be announced on November 3 which could drive
another liquidity rally.
Our currency strategist points to November as an important
month to watch (See “Forex: Pause first” included in this
report). As far as Asia equities are concerned, we believe
forex volatility with a strengthening bias should be positive
for Asia markets. However, with Asia currencies and Asia
equities up by 3.9% and 10% respectively since 1 Sep, we
see the possibility that November will be a month of
consolidation before the next leg up. Any weakness is a
buying opportunity in our view.
“Buy Asia and Emerging markets”
The debate over whether QE2 will be successful is irrelevant
to the “Buy Asia and emerging markets” theme as Asia will
still be the growth region. Under a moderate US growth
environment and continuation of low rates policy, Asia
markets could potentially mirror the early 1990s’ where
investments will lead growth in the next decade.
ETFs exposed to Asia ex-Japan markets
ETF Ticker Mkt Cap Country/ Underlying
(US$ m) Region Index
Tracker
Singapore listed ETFs
CIMBFTASEAN40 ASEAN SP Equity 209 ASEAN ASEAN40
Lyxor APEX50 APEX SP Equity 13 Asia ex-Jap MXAPEXA
Lyxor Asia AEJ SP Equity 139 Asia Pac ex-Jap MXAPJ
DBXT MS Asia X-JP XAXJ SP Equity 508 Asia ex-Jap NDUECAXJ
DBXT MSCI EM Asia XMAS SP Equity 7 Asia Pac ex-Jap NDUEEGFA
DBXT MSCI Pacific ex Japan XPXJ SP Equity 43 Pac ex-Jap NDDUPXJ
Hong Kong listed ETFs
iShares APEX50 3010 HK Equity 43 APAC ex-J MXAPEXA
iShares APEX Mid Cap 3032 HK Equity 21 APAC ex-J MXAPEXAM
iShares APEX Small Cap 3004 HK Equity 13 APAC ex-J MXAPEXAS
Lyxor MSCI Asia ex-Japan 2815 HK Equity 68 APAC ex-J MXAPJ
iShares Emerging Asia 2802 HK Equity 28 Asia MXMS
DBXT Emerging Mkts Asia 3035 HK Equity 8 Asia NDUEEGFA
DBXT Pacific ex Japan 3043 HK Equity 43 Pac x Jap NDDUPXJ
SPDR FTSE Greater China ETF 3073 HK Equity 72 HK/Taiwan GPSSG239
Source: Datastream
Singapore STI to break out of its trading range
DBSVickers’ strategist for Singapore, Janice Chua, believes
that the Singapore market is ready to break out of its
trading band and sees the STI trading up to 3500 in the next
12 months. (See report “Singapore strategy : All boats rise
with the tide”, 13 October, 2010”). She recommends going
for big large caps laggards. As good news gets reflected in
the valuation of a handful of current market leaders, there is
room for future liquidity inflows to benefit the rest of the
index laggards as they play catchup. Our target is 3500 for
year end 2011, suggesting 10% upside.
Multi-year rally awaits the Thai market
We also believe that a multi-year rally awaits the Thai
market. As seen from the following relative performance
chart, Thailand has been lagging its regional peers in local
currency and USD terms for the past 20 years! If politics is
one of one of the key reasons for the P/E de-rating, the
easing of political tension from its peak should see the stock
market re-rate back to historical average.
While short-term valuation opportunities have become
harder to identify following the recent rally in Thailand, it is
still one of the cheapest markets in the region. The SET
index could potentially trade towards the upper limit of its
historical P/E range in the last 10 years.
Thai relative performance to MSCI Asia ex-Japan
120
100
80
60
40
20
0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Source: Datastream
Local currency
USD
Source: DATASTREAM
Page 11

Regional ETF Focus
Get set for a liquidity rally
Thai P/E band
700
600
500
400
300
200
100
700
600
500
400
300
200
100
Malaysia – market uptrend intact
DBS Malaysia strategist believes that the market uptrend is
intact and is targeting 1650 on KLCI by end 2011 –11%
upside from current levels. Budget 2011 is private sector
friendly and Malaysia’s PM reaffirmed commitment to the
RM40bn high impact MRT project that will start in 2011.
We believe the project, if completed, will be instrumental in
transforming Malaysia to a high income nation and benefit
many private sectors.
ASEAN – back to 1990’s
9
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Source: Datastream
Indonesia – no overheating in the stock market
Source: DATASTREAM
Although it has re-rated to 14.3x we don’t see the JCI
market being overheated. JCI’s performance to date is in
line with past years performance and flows to Indonesia
weren’t any larger. Notably this year we see a lot of capital
raising to absorb the demand, both domestic and foreign,
which should bode well for the longer sustainability of the
rally.
With the index now trading at 14.8x 12-month forward P/E
we expect consolidation in the market before the next leg
up. Accordingly our conservative approach to valuations of
14x P/E (no re-rating) and 20% growth could bring the JCI
to 4125 by the end of 2011, which represents only 10% rise
from current levels.
9
We believe that ASEAN markets will continue to outperform
the Asia ex-Japan benchmark led by many investment
initiatives, strong domestic demand and a low interest rate
environment. A diversified portfolio can be achieved
through investing in CIMB ASEAN40 ETF listed in Singapore.
Hong Kong / China to continue to outperform
China and China related H-share index outperformed the
regional index by 3-9% and the 2823 HK now trades at a
premium of 8% to its NAV.
We continue to see that China A- share should benefit
directly from RMB revaluation. China related ETFs continue
to draw interest, with a combined turnover of US$360mil a
day among those listed in Hong Kong and Singapore.
The A-share ETF traded at a premium to NAV, reflecting
strong demand for A-shares amid limited supply. The Hang
Seng Index A-H premium index has rebounded from the low
since we highlighted it in our last report, but it’s still about
20% from the high, suggesting that A-shares still look
attractive.
Meanwhile the index heavyweights like the Banks and Oil
companies have been lagging in terms of performance. We
expect easing concerns on policy uncertainty and firming oil
prices to benefit these two sectors; and an influx of liquidity
to benefit the big caps.
Page 12

Regional ETF Focus
Get set for a liquidity rally
Fig. 8: Singapore listed ETF
ETF Ticker Mkt Cap Style Country/ Underlying Ask Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Region Index Price Price INAV Discount Volume Value (US$m)
Tracker 15-Oct 15-Oct (latest) (20 day) (20 day)
EQUITIES
Global / Regional Funds - Ex Asia
Lyxor World WLD SP Equity 25 Global Fund Global MXWO 1.22 1.23 1.23 -0.2% 6,233 0.007
DBXT MSCI World XMWO SP Equity 5 Global Fund Global NDDUWI 2.93 2.94 2.96 -0.9% 16,716 0.049
DBXT DJ Stoxx Gl Dvd XGSD SP Equity 423 Global Fund Global SDGP 26.86 26.86 27.64 -2.8% 636 0.017
DBXT MSCI Europe XMEU SP Equity 1120 Region Fund Europe NDDUE15 44.75 44.75 45.64 -2.0% 1,470 0.064
Lyxor MSCI Europe MEU SP Equity 6 Region Fund Europe MXEU 12.95 13.03 12.98 0.0% 3,040 0.038
DBXT DJ Euro Stoxx XESX SP Equity 2669 Region Fund Europe SX5E 41.59 41.59 40.77 2.0% 802 0.033
Lyxor Emerg.Markets LEM SP Equity 66 Region Fund Emerg. Mkt MXEF 11.27 11.32 11.26 0.3% 8,392 0.089
DBXT Emerg. Mkts XMEM SP Equity 6 Region Fund Emerg. Mkt NDUEEGF 4.23 4.12 4.20 -0.6% 574 0.002
Lyxor Eastern Europe CEC SP Equity 12 Region Fund East Europe CECEEUR 5.92 5.94 5.95 -0.3% 11,975 0.066
Lyxor Latin America LTM SP Equity 25 Region Fund Latin America MXLA 9.21 9.21 9.22 -0.1% 11,720 0.102
Country Funds - OECD
Lyxor NASDAQ-100 NDX SP Equity 27 Growth US NDX 8.27 8.29 8.22 0.7% 400 0.003
DBXT S&P Short XSPS SP Equity 233 Contrarian US SPXTS 48.84 48.84 48.74 0.2% 3,662 0.184
Lyxor DJIA DJI SP Equity 7 Country Fund US INDU 11.12 11.14 11.12 0.1% 1,866 0.020
DBXT MSCI USA XMUS SP Equity N/A Country Fund US NDDLUS 26.68 26.75 27.69 -3.5% - N/A
DBXT S&P 500 K6K SP Equity N/A Country Fund US SPTR500N 18.47 18.47 18.42 0.3% 1,650 0.030
Lyxor Japan JPN SP Equity 24 Country Fund Japan TPX 1.03 1.03 1.03 0.2% 32,725 0.034
DBXT MSCI Japan LF2 SP Equity 389 Country Fund Japan NDDUJN 37.53 37.81 37.60 0.2% 3,000 0.111
DBXT S&P/ ASX 200 LF1 SP Equity 151 Country Fund Australia ASA51 33.12 33.36 33.23 0.0% 6,055 0.194
Country Funds - Emerging (Non-Asia)
DBXT MSCI Brazil XMBR SP Equity 9 Country Fund Brazil NDUEBRAF 7.49 7.62 7.43 1.7% 2,952 0.021
Lyxor Russia RUS SP Equity 33 Country Fund Russia RU10D 4.02 4.04 4.05 -0.5% 15,009 0.059
DBXT Russia Capped XMRC SP Equity 8 Country Fund Russia MXRUC25P 3.10 3.11 3.10 0.1% 4,063 0.012
Regional Funds - Asia x Japan
CIMBFTASEAN40 ASEAN SP Equity 209 Region Fund ASEAN ASEAN40 10.24 10.28 10.26 0.0% 12,130 0.123
Lyxor APEX50 APEX SP Equity 13 Region Fund Asia ex-Jap MXAPEXA 4.19 4.22 4.21 -0.1% 12,690 0.051
Lyxor Asia AEJ SP Equity 139 Region Fund Asia Pac ex-Jap MXAPJ 4.71 4.72 4.71 0.1% 470,922 2.108
DBXT MS Asia X-JP XAXJ SP Equity 508 Region Fund Asia ex-Jap NDUECAXJ 32.73 32.96 32.91 -0.2% 402 0.000
DBXT MSCI EM Asia XMAS SP Equity 7 Region Fund Asia Pac ex-Jap NDUEEGFA 3.87 3.83 3.82 0.7% 1,155 0.004
DBXT MSCI Pacific ex Japan XPXJ SP Equity N/A Region Fund Pac ex-Jap NDDUPXJ N/A N/A 4.35 N/A - N/A
Country Funds - North Asia
Lyxor China H ASI SP Equity 80 Country Fund China HSCEI 17.52 17.68 17.61 -0.1% 14,451 0.234
DBXT FTChina25 XX25 SP Equity 377 Country Fund China TXINOU 33.44 33.44 33.65 -0.6% 9,283 0.302
United SSE 50 China S$ USSE50 SP Equity 104 Country Fund China SSE50 2.23 2.24 2.00 11.9% 386,320 0.532
DBXT CSI300 Index XCSI SP Equity 37 Country Fund China SHSZ300 10.88 11.16 9.77 12.8% 116,015 1.155
DBXT MSCI China LG9 SP Equity 6 Country Fund China NDEUCHF 13.23 13.34 13.30 -0.1% 8,650 0.109
Lyxor HangSeng HSI SP Equity 26 Country Fund Hong Kong HSI 3.07 3.09 3.08 0.0% 10,773 0.032
Lyxor Korea KRW SP Equity 66 Country Fund South Korea MXKR 4.76 4.79 4.78 -0.1% 54,066 0.245
DBXT MSCI Korea XMKO SP Equity 247 Country Fund South Korea MXKR 53.73 54.05 54.00 -0.2% 8,397 0.428
DBXT MSTaiwan XMTW SP Equity 160 Country Fund Taiwan NDEUSTW 17.36 17.48 17.47 -0.3% 15,347 0.265
Lyxor Taiwan TWN SP Equity 62 Country Fund Taiwan TAMSCI 0.97 0.97 0.98 -1.0% 87,010 0.084
Country Funds - South Asia
IS MSCI INDIA INDIA SP Equity 1038 Country Fund India MXIN 8.35 8.37 8.35 0.1% 554,305 4.503
Lyxor MS India INR SP Equity 303 Country Fund India MXIN 18.63 18.63 18.51 0.6% 863 0.016
DBXT MSCI India LG8 SP Equity 4 Country Fund India NDEUSIA 11.63 11.68 11.77 -1.0% 17,386 0.198
DBXT Nifty XNIF SP Equity 534 Country Fund India NIFTY 140.81 141.67 141.43 -0.1% 4,508 0.627
Lyxor India Nifty S$ LNFU SP Equity 46 Country Fund India NIFTY 18.06 18.30 18.01 0.9% 1,813 0.022
Country Funds - South East Asia
Streetracks STI ETF S$ STTF SP Equity 153 Country Fund Singapore FSSTI 3.25 3.26 3.27 -0.5% 193,400 0.424
DBS STI ETF S$ DBSSTI SP Equity 32 Country Fund Singapore FSSTI 3.23 3.25 3.22 0.5% 48,840 0.106
Lyxor Malaysia MAL SP Equity 31 Country Fund Malaysia MXMY 8.96 9.04 8.96 0.4% 108,764 0.946
DBXT MSCI Malaysia LG6 SP Equity 4 Country Fund Malaysia NDDUMAF 12.23 12.32 12.32 -0.4% 3,905 0.047
DBXT MSCI Thailand LG7 SP Equity 25 Country Fund Thailand NDEUTHF 15.76 15.86 15.84 -0.2% 28,493 0.429
DBXT MSCI Indonesia XMIN SP Equity 96 Country Fund Indonesia NDEUINF 14.46 14.60 14.41 0.8% 202,166 2.900
DBXT FTSE Vietnam XFVT SP Equity 248 Country Fund Vietnam FVTTE 37.37 37.37 36.64 2.0% 30,746 1.128
FIXED INCOME
ABF SG BOND S$ SBIF SP Equity 227 Total Return Singapore N/A 1.16 1.17 1.14 1.8% 30,400 0.025
DBXT USD My Mkt XUSD SP Equity N/A Money Market US DBMMFED1 N/A N/A 170.88 N/A - N/A
DBXT Infl Lkd Treasuries XUIT SP Equity N/A Sovereign US DBLNUSD 245.50 245.50 246.75 -0.5% 1,331 0.316
DBXT iBoxx Treasuries XUTD SP Equity 28 Sovereign US ITRROV 192.96 192.96 191.95 0.5% 3 0.000
DBXT SG Mny Mkt S$ XSGO SP Equity N/A Money Market Singapore DBMMSGDO N/A N/A 107.75 N/A - N/A
DBXT iBoxx Korea KT2 SP Equity 30 Total Return South Korea ABUTKOGO 125.00 125.00 125.69 -0.5% 2,047 0.270
DBXT AU Mny Mkt A$ KV5 SP Equity 22 Money Market Australia DBMMAUDO 188.37 188.37 189.07 -0.4% - N/A
DBXT AU Mny Mkt US$ KV6 SP Equity 7 Money Market Australia DBMMAUDO 182.71 182.71 188.44 -3.0% 8 0.001
DBXT AU Mny Mkt S$ KV7 SP Equity 7 Money Market Australia DBMMAUDO 242.60 242.60 243.83 -0.5% 357 0.060
DBXT iBoxx SG Govt S$ KV4 SP Equity 29 Sovereign Singapore ABTRSGGO 122.91 122.91 120.46 2.0% 1,805 0.151
DBXT DBLCI-OY Balanced J0S SP Equity N/AAsset Allocation Australia DBLCBUTN 36.77 36.95 30.32 N/A - N/A
DBXT AU Bonds K6Y SP Equity 34 Debt Australia DBLNSSAB 154.83 154.83 152.48 1.5% 154 0.019
COMMODITIES
SPDR Gold Trust GLD SP Equity 33713 Commodities Global GOLDLNPM 134.76 134.87 134.62 0.1% 34,618 4.510
Lyxor CRB Non Energy CRN SP Equity 30 Commodities Global CRYNETR 2.77 2.78 2.77 0.2% 3,747 0.010
Lyxor Commodity CRB SP Equity 108 Commodities Global CRYTR 2.90 2.91 2.90 0.2% 22,358 0.062
DBXT DJUBS Comm Index L5F SP Equity 5 Commodities Global DBCMDCTU 34.07 34.24 33.67 1.5% 60 0.002
DBXT Light Energy L5G SP Equity 5 Commodities Global DBCMBUTN 20.48 20.59 20.00 2.7% 90
Source: Bloomberg. Price and NAV in USD unless indicated otherwise in ETF column
0.002
Page 13

Regional ETF Focus
Get set for a liquidity rally
Fig. 9: Hong Kong listed ETFs
ETF Ticker Mkt Cap Style Country/ Underlying Ask Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Region Index Price Price INAV Discount Volume Value
Tracker 15-Oct 15-Oct (latest) (20 day)
('000)
(20 day)
(US$m)
EQUITIES
Global / Regional Funds - Ex Asia
Lyxor World 2812 HK Equity 25.2 Global Fund Global MXWO 9.55 9.49 9.54 -0.2% 14 0.017
DBXT MSCI World 3019 HK Equity 5.5 Global Fund Global NDDUWI 23.25 23.10 22.97 0.9% 0 0.000
Lyxor Emerging Mkts 2820 HK Equity 65.7 Emerg. Mkt Int'l MXEF 88.00 87.25 87.94 -0.4% 2 0.022
DBXT Emerging Mkts 3009 HK Equity 6.5 Emerg. Mkt Int'l NDUEEGF 33.05 32.90 32.61 1.1% 0 0.002
Country Funds - OECD
Lyxor NASDAQ-100 2826 HK Equity 26.9 Geographically
Focused Fund US NDX 64.50 64.10 64.21 0.1% 1 0.006
Lyxor RAFI Europe 2806 HK Equity 12.8 Growth & Inc. EZ FREU 49.85 49.60 49.65 0.2% 7 0.043
Lyxor RAFI US 2803 HK Equity 12.6 Growth & Inc. US FR10 41.50 40.70 40.93 0.4% 6 0.033
DBXT USA 3020 HK Equity 1810.9 Country Fund US NDDLUS 216.40 215.80 214.85 0.6% 0 0.001
Lyxor Japan Topix 2814 HK Equity 23.7 Country Fund Japan TPX 8.02 7.98 7.99 0.1% 114 0.116
Country Funds - Emerging (Non-Asia)
DBXT MSCI Brazil 3048 HK Equity 8.8 Country Fund Brazil NDUEBRAF 58.80 58.55 57.64 1.8% 15 0.112
Lyxor Russia 2831 HK Equity 32.3 Country Fund Russia RU10D 31.80 31.10 31.58 -0.4% 47 0.185
DBXT MSCI Russia 3027 HK Equity 8.2 Country Fund Russia MXRUC25P 24.20 24.05 24.08 0.2% 2 0.007
Regional Funds - Asia x Japan
iShares APEX50 3010 HK Equity 47.9 Region Fund APAC ex-J MXAPEXA 38.95 38.70 38.84 0.0% 6 0.030
iShares APEX Mid Cap 3032 HK Equity 23.5 Region Fund APAC ex-J MXAPEXAM 45.75 45.50 45.60 0.1% 4 0.023
iShares APEX Small Cap 3004 HK Equity 14.7 Region Fund APAC ex-J MXAPEXAS 47.60 47.35 47.50 -0.1% 3 0.016
Lyxor MSCI Asia ex-Japan 2815 HK Equity 139.4 Country Fund APAC ex-J MXAPJ 36.80 36.65 36.70 0.1% 162 0.755
iShares Emerging Asia 2802 HK Equity 31.7 Emerg. Mkt Asia MXMS 43.90 43.85 43.55 0.7% 22 0.118
DBXT Emerging Mkts Asia 3035 HK Equity 6.7 Region Fund Asia NDUEEGFA 30.30 30.15 29.68 1.8% 1 0.003
DBXT Pacific ex Japan 3043 HK Equity 47.1 Region Fund Pac x Jap NDDUPXJ 33.95 33.80 33.78 0.3% 0 0.002
Country Funds - North Asia
Hang Seng H-Share IDX 2828 HK Equity 2908.1 Growth Fund China HSCEI 137.30 137.20 137.36 -0.1% 1,839 21.061
Hang Seng FTChina 25 2838 HK Equity 36.2 Country Fund China XIN0I 205.40 204.20 205.09 -0.1% 2 0.035
iShares A50 China Tracker 2823 HK Equity 8622.7 Country Fund China XIN50 14.24 14.22 13.19 7.9% 115,759 192.483
iShares MSCI China 2801 HK Equity 185.4 Country Fund China MXCN 23.60 23.50 23.62 -0.3% 194 0.550
WISE CSI 300 China 2827 HK Equity 912.7 Country Fund China SHSZ300 37.40 37.25 33.58 11.1% 2,182 9.840
WISE SSE 50 China 3024 HK Equity 68.0 Country Fund China SSE50 23.50 23.40 21.11 11.1% 51 0.136
DBXT FT Xin China 25 3007 HK Equity 377.2 Country Fund China TXINOU 261.60 259.80 261.20 -0.2% 0 0.013
VALUE CHINA ETF 3046 HK Equity 51.3 Country Fund China GPVP002 42.50 42.15 42.55 -0.5% 134 0.676
ISHARES CSI 300 INDEX 2846 HK Equity 203.4 Country Fund China CSIR0300 32.15 32.05 31.02 3.5% 768 2.957
CICC-SZSE 100 INDEX TRACKE 3051 HK Equity 23.9 Country Fund China SI100 43.75 43.60 40.13 8.8% 1 0.003
DBXT CSI 300 Index 3049 HK Equity 299.2 Country Fund China SHSZ300 8.63 8.62 7.83 10.2% 42,756 42.891
Paragon CSI RAFI 50 2818 HK Equity 34.8 Country Fund China SH000925 34.05 33.75 29.61 14.5% 12 0.046
SPDR FTSE Greater China ETF 3073 HK Equity 71.7 Country Fund China GPSSG239 26.65 26.40 24.94 6.4% 24 0.081
Lyxor MSCI Korea 2813 HK Equity 66.1 Country Fund S. Korea MXKR 37.10 36.85 37.08 -0.3% 62 0.282
DBXT MSCI Korea 2848 HK Equity 247.7 Country Fund S. Korea MXKR 419.60 418.40 418.93 0.0% 0 0.017
Lyxor MSCI Taiwan 2837 HK Equity 62.6 Country Fund Taiwan TAMSCI 7.54 7.51 7.60 -1.0% 160 0.153
DBXT MSCI Taiwan 3036 HK Equity 161.6 Country Fund Taiwan NDEUSTW 136.00 135.20 135.52 0.1% 1 0.010
POLARIS TAIWAN TOP50 3002 HK Equity 25.9 Country Fund Taiwan TW50 12.20 12.18 12.43 -1.9% 40 0.062
Hang Seng Index ETF 2833 HK Equity 3820.2 Growth Fund HK HSI 241.20 240.80 240.97 0.0% 89 0.853
WISE CSI HK Tracker 2825 HK Equity 20.8 Growth Fund HK CSIHHK 20.45 20.15 20.36 -0.3% 1 0.004
Tracker Fund of HK 2800 HK Equity 6452.7 Growth Fund HK HSI 24.35 24.30 24.33 0.0% 18,137 54.448
Country Funds - South Asia
iShares Sensex Tracker 2836 HK Equity 289.9 Country Fund India SENSEX 20.45 20.30 20.25 0.6% 1,234 3.126
Lyxor MSCI India 2810 HK Equity 301.0 Country Fund India MXIN 145.30 144.70 143.54 1.0% 6 0.106
DBXT S&P CNX Nifty 3015 HK Equity 534.7 Country Fund India NIFTY 1100.00 1095.00 1097.47 0.0% 0 0.068
Country Funds - South East Asia
DBXT FTSE Vietnam 3087 HK Equity 248.0 Country Fund Vietnam FVTTE 290.60 289.80 284.55 2.0% 30 1.124
FIXED INCOME
ABF HK Bond Index Fund 2819 HK Equity 306.1 Total Return N/A N/A 104.00 103.00 103.47 0.0% 3 0.037
ABFPan-Asia Bd Idx Fd US$ 2821 HK Equity 2370.8 Total Return N/A ABTRPAUH 124.95 124.10 124.25 0.2% 4 0.552
DB X-TRACKERS USD MONEY M3011 HK Equity 49.7 Global Fund N/A DBMMFED1 170.90 170.80 170.88 0.0% - N/A
COMMODITIES
Lyxor Commodity CRB 2809 HK Equity 107.1 Commodities Global CRYTR 22.60 22.45 22.51 0.1% 56 0.155
SPDR Gold Trust 2840 HK Equity 57310.6 Commodities Global GOLDLNPM 1046.00 1045.00 1044.76 0.1% 21 2.744
Source: Bloomberg. Price and NAV in HKD unless indicated otherwise in ETF column
Page 14

Regional ETF Focus
Get set for a liquidity rally
Fig. 9 cont’d: Hong Kong listed ETFs
ETF Ticker Mkt Cap Style Country/ Underlying Ask Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Region Index Price Price INAV Discount Volume Value
Tracker 15-Oct 15-Oct (latest) (20 day)
('000)
(20 day)
(US$m)
Sector Funds
C-TRACKS Bldg/ Constr. 10800 HK Equity 0.1 Sector Funds China TWSECON N/A N/A 3.25 N/A - N/A
C-TRACKS Hang Seng ChinaH 10828 HK Equity N/A Sector Funds China H-FIN N/A N/A 17.45 N/A - N/A
C-TRACKS Hang Seng Property 10829 HK Equity N/A Sector Funds China HSP N/A N/A 2.86 N/A - N/A
C-TRACKS S&P Financials 10816 HK Equity N/A Sector Funds China SP5TFINL N/A N/A 2.85 N/A - N/A
C-TRACKS TAIEX Electronics 10801 HK Equity 0.0 Sector Funds Taiwan TWSEELEC N/A N/A 3.39 N/A - N/A
C-TRACKS TAIEX Finance 10802 HK Equity 0.1 Sector Funds Taiwan TWSEBKI 9.64 9.50 8.85 0.08 - N/A
iShares CSI Materials 3039 HK Equity 102.1 Sector Funds China CSIR0909 17.64 17.56 16.54 6.4% 211 0.410
iShares CSI Financials 2829 HK Equity 164.8 Sector Funds China CSIR0914 13.90 13.88 12.71 9.3% 391 0.635
iShares CSI Infra Index 3006 HK Equity 42.7 Sector Funds China CSIR0950 14.42 14.38 13.31 8.2% 15 0.026
iShares CSI Energy 3050 HK Equity 67.8 Sector Funds China CSIR0908 15.06 15.02 14.05 7.0% 157 0.257
DBXT CSI300 Banks 3061 HK Equity 45.5 Sector Funds China SH000951 10.90 10.88 9.80 11.1% 4,533 5.483
DBXT CSI300 Real Estate 2816 HK Equity 44.5 Sector Funds China SH000952 11.30 11.28 10.26 10.0% 3,837 4.842
DBXT CSI300 Materials 3062 HK Equity 55.6 Sector Funds China SH000909 9.29 9.28 8.36 11.1% 2,860 2.835
DBXT CSI300 Consumer 3025 HK Equity 47.3 Sector Funds China SH000911 10.84 10.82 9.79 10.6% 1,718 2.248
DBXT CSI300 Health Care 3057 HK Equity 28.2 Sector Funds China SH000913 15.52 15.50 14.00 10.8% 1,947 3.970
DBXT CSI300 Transportation 3063 HK Equity 17.2 Sector Funds China N/A 4.48 4.46 4.10 9.0% 2,214 1.132
DBXT CSI300 Energy 3017 HK Equity 27.0 Sector Funds China SH000908 10.08 10.04 9.17 9.7% 3,138 3.375
DBXT CSI300 Utilities 3052 HK Equity 18.3 Sector Funds China SH000917 4.94 4.93 4.48 10.2% 1,692 0.978
DBXT CSI300 Industrials 3005 HK Equity 20.8 Sector Funds China SH000910 7.33 7.32 6.66 10.0% 1,597 1.337
DBXT CSI300 Financials 2844 HK Equity 33.9 Sector Funds China SH000914 11.46 11.44 10.34 10.7% 4,028 5.023
DCI CSI China Consumer 3071 HK Equity 24.5 Sector Funds China SH000942 11.90 11.60 11.07 6.1% 69 0.103
iShares CSI Cons Disc 3001 HK Equity 79.5 Sector Funds China SH000911 20.90 20.75 19.15 8.7% 82 0.208
iShares CSI Cons Staples 2841 HK Equity 82.2 Sector Funds China SH000912 21.25 21.15 19.01 11.5% 103 0.282
Source: Bloomberg. Price and NAV in HKD unless indicated otherwise in ETF column
Page 15

Regional ETF Focus
Get set for a liquidity rally
Singapore – Neutral (Joanne Goh, Group Research compilation)
More upside for STI despite 3Q GDP moderation
Fig. 10: Straits Times Index (daily)
Singapore’s 3Q GDP advanced released this Thursday
confirmed a sequential drop in GDP closed to 20% QoQ
saar. Volatility in the pharmaceutical sector is the major
contributing factor.
We believe investors should take the 3Q moderation, and
even a possible “technical recession” in strides as the
slowdown was widely anticipated after a very strong 1H.
Being the strongest growth region in the world coupled
with a appreciating currency bias, it should continue to
attract fund flows to drive a re-rating. Meanwhile STI is a
laggard in Asia and has room to ‘catch up’.
Straits Times Index Technical Outlook (Yeo Kee Yan,
DBSVickers)
We raise STI’s technical objective to 3438. While near-term
resistance remains at 3250, we see minor pullback
supported at the 15-day exponential moving average
(currently at 3124) and the index should eventually surpass
3250.
We believe the rally that started from 2900 in end August is
sustainable because: 1) The rise has been accompanied by
healthy market participation from small caps and large caps
2) The rise is accompanied by a rise in volume and value of
shares traded 3) Our economist sees more liquidity inflow
into Asia sustaining in the months ahead
The rise above the 3030 level to make a fresh YTD high
looks ‘impulsive’. Impulse has its implications: 1) The rise is
sustainable 2) Technical oscillators such as the 14-day RSI
and the daily stochastics can stay around the overbought
line for weeks or even months. The 14-day RSI currently
reads 66while the stochastics is at 69. 3) We can apply
major technical projections to identify upside objective for
the STI.
The chart below shows our preferred wave count. By
projecting the amplitude of wave 1 (395pts) above the high
of wave 1 (@ STI 3043), we attain a technical objective of
3438. We reference the near-term support at the 15-day
EMA that has held intact since the start pf September. It is
currently at 3124. Major support is at the 65-day EMA,
currently near 3030.
Source: DBS Research
19% drop in 3Q GDP (Irvin Seah, DBS Group Research)
Third quarter advance GDP estimates are within expectation
as the economy grew by 10.3% YoY (DBSf: 10.4%;
Consensus: 10.8%). But on a sequential basis, the economy
contracted sharply by 19.8% QoQ saar (DBSf: 17.0%;
Consensus: 15.7%) as an upward revision in 2Q10 GDP
further amplify the quarterly drop (see table).
Singapore GDP growth
3Q09 4Q09 2009 1Q10 2Q10 3Q10(a)
Overall GDP (%QoQ saar) 11.1 -1.0 - 45.9 27.3 -19.8
Overall GDP (%YoY) 1.8 3.8 -1.3 16.9 19.6 10.3
Manufacturing 7.6 2.2 -4.1 38.1 46.1 12.1
Construction 11.7 11.5 16.2 9.7 11.5 6.7
Services producing -1.1 3.7 -1.4 11.4 11.8 10.2
And as we had mentioned in our earlier article “It’s
payback time” dated 11 Oct10, this is a record sequential
contraction and one that is worse than the supposedly
“free-fall” in GDP experienced in the recent US financial
crisis, the slump during the dot.com bust as well as the
doldrum during the Asia financial crisis. Indeed, growth
wouldn’t have fallen by more dramatic fashion than this
considering that we had a record expansion not too long
ago in the first quarter. Sharp pullbacks in production from
the volatile pharmaceutical segment have brought down
overall industrial production in recent months. And the
exceptionally high comparison base in 1H10 further
amplifies the drop.
Page 16

Regional ETF Focus
Get set for a liquidity rally
The worst ever sequential contraction
% QoQ saar
50
40
1Q10: 45.9%
normalization process that is currently underway in Asia will
soon be manifested in Singapore’s economic growth
numbers, except with some doses of volatilities coming from
the pharmaceutical industry from time to time. Our full year
GDP growth remains at 15%.
30
GDP growth (%QoQ saar)
Sing NEER policy band steepened and widened
20
10
0
-10
-20
-30
Mfg recession, 85/86
Asian
financial crisis,
Dot.com bust, 2001
US financial crisis, 2008
3Q10 (a): -19.8%
Jun-75 Jun-80 Jun-85 Jun-90 Jun-95 Jun-00 Jun-05 Jun-10
But isolating these volatilities, Singapore’s underlying
growth momentum is slowing and much in line with the
normalization process in Asia with the V-shaped recovery
turning into a square root shape. And more than ever
before, the prospect of the Singapore economy is more
closely tied to Asia than anywhere in the world. Hence, this
The Monetary Authority of Singapore (MAS) surprised the
market yet again after the “double-barrel” move in April.
This time, the MAS has steepened the slope of the Sing
NEER policy band as well as widened the width of the band.
While it could reflect the general optimism in terms of
growth outlook by the authority, it is also a pre-emptive
move to address inflationary concern ahead. That is, the
focus is on inflation in the coming months as external
inflationary pressure is expected to pick up on higher
commodity prices. Moreover, with the prospect of another
quantitative easing move by the US Fed, inflows will be
strong and upward pressure on the SGD will be even
greater. The widening of the band will in some ways cater
to an anticipated greater volatility in the FX market going
forward. We have recently revised our SGD forecast to
reflects further appreciation of the currency (see “SGD
higher, with or without tightening” dated 7 Oct10).
Fig. 16: Singapore and Hong Kong listed ETFs exposed to the Singapore market
ETF Ticker Mkt Cap Style Country/ Underlying Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Region Index Price INAV Discount Volume Value (US$m)
Tracker 15-Oct (latest) (20 day) (20 day)
Singapore listed ETFs
Streetracks STI ETF S$ STTF SP Equity 140 Country Fund Singapore FSSTI 3.03 3.03 -0.5% 160,150 0.329
DBS STI ETF S$ DBSSTI SP Equity 29 Country Fund Singapore FSSTI 3.02 3.02 -0.3% 22,215 0.045
Source: Bloomberg. Notes: HK-listed ETFs - Vol in ‘000s, Price and NAV are in HKD unless otherwise stated. SG-listed ETFs – Actual vol
traded, Price and NAV are in US$ unless otherwise indicated
.
Page 17

Regional ETF Focus
Get set for a liquidity rally
Hong Kong / China (Overweight) (Joanne Goh, joannegohsc@dbs.com)
Near term outlook
The Chinese A-share market recovered from its low of 2477
to 2827 currently. We remain hopeful that the market has
passed its worst in terms of policy actions.
With inflation risks returning we believe that market will be
fixated on interest rates. China's 2Q GDP came in at 10.3%
YoY compared to 11.9% in 1Q. GDP in 1H10 grew by
11.1%. 3Q GDP is expected to be 9.5% The numbers
suggest that policies should remain status quo for now as
the economy returns to a more sustainable path. It won't be
necessary to introduce more fiscal stimulus measures or ease
the current monetary policy stance.
We believe that the tightening measures in China will be an
on-going process but the impact will gradually fade. The
rumoured RRR hike (which was temporary for two months
and restricted to six banks) , if true, also signals that more
tightening may be forthcoming. Indeed China raised rates
on 19 Oct as one of the first steps to stem inflationary
expectations. As complications arise from currency,
domestic demand, social and political pressure we believe
China will tread carefully along the tightening path.
Investors are generally less enthusiastic on the Chinese
market on two major concerns - the banking and the
property sectors because of the exceptional loan growth last
year. While this year's loan growth has normalized, the
lingering effect especially on loan quality and capital raising
requirements still haunt. We believe uncertainties will
remain, as there are doubts on the data quality emerging
out of these two sectors. In our view the promising demand
outlook in China and low valuations justify investors'
position in the banking sector.
However the China property sector should go through a
longer adjustment process as supply situation, sticky
housing prices, austerity measures, corporates' balance
sheet should continue to weigh on this sector.
We prefer direct beneficiaries of domestic demand like
retail, food and beverage, and industries, which
manufacture for China's domestic demand. Companies that
are strong in the inner cities should have stronger growths
going forward as economic activities began to shift inwards.
High wage pressures from the coastal regions and the near
completion of the railway transportation should justify the
economic sense.
The property and the banking sector in Hong Kong
meanwhile has a lot to cheer about. Despite the austerity
measures delivered by the government, property prices
continue to rise. We believe this is because of the recent
auctions of “prized” parcels of land in the Kowloon area,
which has never been available for a long time. Moreover
with abundant liquidity from Hong Kong and China as a
result of lower interest rates and cheaper HKD, we continue
to see asset price rise in Hong Kong.
The unemployment picture is also looking better. Hong
Kong is perceived as the “gateway” to China where
demand growth is strong. Moreover, Hong Kong is the only
place in the world where onshore CNY can be exchanged
into USD currently. We expect more overseas companies
from all sectors to set up offices in Hong Kong, hence
improving the employment outlook. (For details, please see
“HK: Hovering at an inflection point”, Chris Leung, 4Q
Economics-Markets-Strategy, 10 Sep 2010).
Meanwhile valuation for the HSI has risen to 13.3x, but still
below historical average of 14.4x. H-shares trade at 13.5x
above the historical mean.
Fig. 22: HSI 12-month forward PER
21
19
17
15
13
11
9
7
5
(x)
02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10
Source: Datastream, IBES
'
Page 18

Regional ETF Focus
Get set for a liquidity rally
Fig. 23: China A/H premium index
220
200
180
160
140
fears stoked a sell-off in commodities and emerging
markets. MSCI Asia ex-Japan retraced 25% from its high to
a low in 2004. In the scale of things a 25% correction for a
market, which had run up 100% is par for the course. The
upside risk was RMB revaluation which would stoke a rally
in Asia equities. After the correction in 2004, Asian equities
recovered once the hard landing fears faded, and as RMB
revaluation speculation powered a strong multi-year rally.
120
100
80
2006 2007 2008 2009 2010
Source: Datastream
Back to 2004
Source: DATASTREAM
The A-H premium has also narrowed to historical low,
indicative of value in Chinese A shares. With the Chinese 'A'
share index having corrected 18% YTD (lowest at 28%), we
believe there is value in the Chinese market.
Fig. 24: HSI performance
000's
35
30
25
20
15
10
5
(1)
(2)
(3)
(4)
(5)
2003 2004 2005 2006 2007 2008 2009 2010
Source: Datastream
(1)
(2)
(3)
(4)
(5)
Source: DATASTREAM
It is worth noting that next year marks the beginning of the
12th year plan where policy guidelines will be delivered in
4Q10. In view of the turbulent past 5 years in the global
markets, we expect more directions to address the volatility
and measures to protect China’s interest amid the volatility.
Whether HSI will perform like it does during 2005 - 2007
remains to be seen. But the Shanghai ‘A’ index surged five
folds in 2006-7, during the first two years of the 5-year plan.
Conspiracy theory is suggesting that liquidity from the
property will be channelled to the stock market, now that
the government is tightening its grip on the sector.
Drivers:
• We do not hold to a hard-landing scenario for China.
Beyond the volatility this quarter, we believe China should
be in a good position to showcase its resilience in the face
of global uncertainty, considering its strong fiscal muscle
and flexibility in monetary policies.
• The earlier than expected completion of the railway
transportation system will expand China's growth into the
second and third tier cities, thus relieving overheating
pressures on the coastal cities and ensuring the
sustainability of growth.
• Rising wages and policies to build a safety net with
healthcare, education and insurance sectors should
continue to support domestic demand growth.
The current scenario resembles 2004 -the year after Asia's
recession from the Tech bubble and SARS. China was poised
to raise rates after the aggressive easing to support the
anaemic economic growth. At the same time global
economic data was rolling over, and China's hard landing
Risks:
• Rising inflation continues to be a threat with calls for
policy tightening.
• Uncertainty of the impact from property measures raise
risks of deterioration in corporate balance sheets.
Page 19

Regional ETF Focus
Get set for a liquidity rally
Fig. 16: Singapore and Hong Kong listed ETFs exposed to the Hong Kong / China market (Hong Kong listed stocks)
ETF Ticker Mkt Cap Style Country/ Underlying Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Region Index Price INAV Discount Volume Value
Tracker 15-Oct (latest) (20 day)
('000)
(20 day)
(US$m)
Hong Kong listed ETFs
Hang Seng H-Share IDX 2828 HK Equity 2908.1 Growth Fund China HSCEI 137.20 137.36 -0.1% 1,839 21.061
Hang Seng FTChina 25 2838 HK Equity 36.2 Country Fund China XIN0I 204.20 205.09 -0.1% 2 0.035
iShares MSCI China 2801 HK Equity 185.4 Country Fund China MXCN 23.50 23.62 -0.3% 194 0.550
DBXT FT Xin China 25 3007 HK Equity 377.2 Country Fund China TXINOU 259.80 261.20 -0.2% 0 0.013
VALUE CHINA ETF 3046 HK Equity 51.3 Country Fund China GPVP002 42.15 42.55 -0.5% 134 0.676
Hang Seng Index ETF 2833 HK Equity 3820.2 Growth Fund HK HSI 240.80 240.97 0.0% 89 0.853
WISE CSI HK Tracker 2825 HK Equity 20.8 Growth Fund HK CSIHHK 20.15 20.36 -0.3% 1 0.004
Tracker Fund of HK 2800 HK Equity 6452.7 Growth Fund HK HSI 24.30 24.33 0.0% 18,137 54.448
C-TRACKS Hang Seng ChinaH 10828 HK Equity N/A Sector Funds China H-FIN N/A 17.45 N/A - N/A
C-TRACKS Hang Seng Property 10829 HK Equity N/A Sector Funds China HSP N/A 2.86 N/A - N/A
Singapore listed ETFs
Lyxor China H ASI SP Equity 80 Country Fund China HSCEI 17.68 17.61 -0.1% 14,451 0.234
DBXT FTChina25 XX25 SP Equity 377 Country Fund China TXINOU 33.44 33.65 -0.6% 9,283 0.302
DBXT MSCI China LG9 SP Equity 6 Country Fund China NDEUCHF 13.34 13.30 -0.1% 8,650 0.109
Lyxor HangSeng HSI SP Equity 26 Country Fund Hong Kong HSI 3.09 3.08 0.0% 10,773 0.032
Source: Bloomberg. Notes: HK-listed ETFs - Vol in ‘000s, Price and NAV are in HKD unless otherwise stated. SG-listed ETFs – Actual vol traded, Price
and NAV are in US$ unless otherwise indicated.
Fig. 17: Singapore and Hong Kong listed ETFs exposed to the China ‘A’ share market
ETF Ticker Mkt Cap Style Country/ Underlying Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Region Index Price INAV Discount Volume Value
Tracker 15-Oct (latest) (20 day)
('000)
(20 day)
(US$m)
Hong Kong listed ETFs
iShares A50 China Tracker 2823 HK Equity 8622.7 Country Fund China XIN50 14.22 13.19 7.9% 115,759 192.483
WISE CSI 300 China 2827 HK Equity 912.7 Country Fund China SHSZ300 37.25 33.58 11.1% 2,182 9.840
WISE SSE 50 China 3024 HK Equity 68.0 Country Fund China SSE50 23.40 21.11 11.1% 51 0.136
ISHARES CSI 300 INDEX 2846 HK Equity 203.4 Country Fund China CSIR0300 32.05 31.02 3.5% 768 2.957
CICC-SZSE 100 INDEX TRACKE 3051 HK Equity 23.9 Country Fund China SI100 43.60 40.13 8.8% 1 0.003
DBXT CSI 300 Index 3049 HK Equity 299.2 Country Fund China SHSZ300 8.62 7.83 10.2% 42,756 42.891
Paragon CSI RAFI 50 2818 HK Equity 34.8 Country Fund China SH000925 33.75 29.61 14.5% 12 0.046
iShares CSI Materials 3039 HK Equity 102.1 Sector Funds China CSIR0909 17.56 16.54 6.4% 211 0.410
iShares CSI Financials 2829 HK Equity 164.8 Sector Funds China CSIR0914 13.88 12.71 9.3% 391 0.635
iShares CSI Infra Index 3006 HK Equity 42.7 Sector Funds China CSIR0950 14.38 13.31 8.2% 15 0.026
iShares CSI Energy 3050 HK Equity 67.8 Sector Funds China CSIR0908 15.02 14.05 7.0% 157 0.257
DBXT CSI300 Banks 3061 HK Equity 45.5 Sector Funds China SH000951 10.88 9.80 11.1% 4,533 5.483
DBXT CSI300 Real Estate 2816 HK Equity 44.5 Sector Funds China SH000952 11.28 10.26 10.0% 3,837 4.842
DBXT CSI300 Materials 3062 HK Equity 55.6 Sector Funds China SH000909 9.28 8.36 11.1% 2,860 2.835
DBXT CSI300 Consumer 3025 HK Equity 47.3 Sector Funds China SH000911 10.82 9.79 10.6% 1,718 2.248
DBXT CSI300 Health Care 3057 HK Equity 28.2 Sector Funds China SH000913 15.50 14.00 10.8% 1,947 3.970
DBXT CSI300 Transportation 3063 HK Equity 17.2 Sector Funds China N/A 4.46 4.10 9.0% 2,214 1.132
DBXT CSI300 Energy 3017 HK Equity 27.0 Sector Funds China SH000908 10.04 9.17 9.7% 3,138 3.375
DBXT CSI300 Utilities 3052 HK Equity 18.3 Sector Funds China SH000917 4.93 4.48 10.2% 1,692 0.978
DBXT CSI300 Industrials 3005 HK Equity 20.8 Sector Funds China SH000910 7.32 6.66 10.0% 1,597 1.337
DBXT CSI300 Financials 2844 HK Equity 33.9 Sector Funds China SH000914 11.44 10.34 10.7% 4,028 5.023
DCI CSI China Consumer 3071 HK Equity 24.5 Sector Funds China SH000942 11.60 11.07 6.1% 69 0.103
iShares CSI Cons Disc 3001 HK Equity 79.5 Sector Funds China SH000911 20.75 19.15 8.7% 82 0.208
iShares CSI Cons Staples 2841 HK Equity 82.2 Sector Funds China SH000912 21.15 19.01 11.5% 103 0.282
Singapore listed ETFs
United SSE 50 China S$ USSE50 SP Equity 104 Country Fund China SSE50 2.24 2.00 11.9% 386,320 0.532
DBXT CSI300 Index XCSI SP Equity 37 Country Fund China SHSZ300 11.16 9.77 12.8% 116,015 1.155
Source: Bloomberg. Notes: HK-listed ETFs - Vol in ‘000s, Price and NAV are in HKD unless otherwise stated. SG-listed ETFs – Actual vol traded, Price
and NAV are in US$ unless otherwise indicated.
Page 20

Regional ETF Focus
Get set for a liquidity rally
China outlook (David Carbon, davidcarbon@dbs.com, extracted from report name “the kink in the curve"
- Economics-Markets-Strategy, 11 Sep 2010)
China is the risk but the chance of a significant
slowdown is remote
Risks to the outlook continue to revolve increasingly around
China, not the US and/or the G3. That 18% growth in
consumption since 3Q08 translates into $177bn of new
consumption and China is responsible for nearly two-thirds
of it. In other words, China has put $115bn of new
consumer demand on the table since 3Q08 compared to a
mere $7bn contribution from the US. If the risks aren’t
apparent, ask yourself: if you took those contributions to
growth / recovery away, which would hurt more
Incremental consumption growth since 3Q08
USD bn, 3Q08 - 2Q10, seas adj
200
177
175
150
125
100
75
50
22
25
7 6 -20
0
-25
Asia-10 Asia-10 USA Japan EU-16
(ex-CH,
IN, ID)
The good news is, despite the recent concerns about a
slowdown in China, demand growth there remains very
strong and the risk of further slowing seems remote. Take
consumption demand, for example, as proxied by retail sales.
Growth today is as fast or faster than it’s been in a decade
in real and / or nominal terms. And it’s accelerating, not
decelerating.
China – retail sales growth
% YoY, 3mma, real sales deflated by CPI
30
25
20
15
10
5
0
98 99 00 01 02 03 04 05 06 07 08 09 10
Fixed asset investment It continues to grow at a trend
pace of 26% (chart below), only a point below the 27%
rate averaged since 2004 – a rate that everyone used to say
China – fixed asset investment
CNY bn / mth, seas adj
2,200
2,000
1,800
1,600
1,400
was “too fast”. h
1,200
The 4Q08 "shock"
drop that brought
the
government's 1H09
1H09 surge
ends in Aug09
Jan/Feb10:
back on trend
Nominal
1,000
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
And loan growth Supposedly the government has put the
clamps on – but the data say otherwise. Total loan growth
is running at an 18% saar pace (charts at top of next page),
which is indeed lower than the 41% saar pace run in 1H09
when everyone was worried about the global financial crisis.
But today’s 18% growth rate is still higher than the 17%
pace averaged during the heydays of 2005-2007 when GDP
was growing 12% - 13% per year.
Real
Jan-Jul growth
runs at 26%
(saar)
And that’s not the half of it. With the focus now on
building infrastructure, growth in medium- and long-term
loans has not slowed at all – it has accelerated significantly
to a 47% saar pace from the 42% pace run in 2009 (chart
top right of next page). That’s more than twice the pace
that prevailed during the go-go years when GDP growth ran
at 12%-13%.
Page 21

Regional ETF Focus
Get set for a liquidity rally
China Financial institution loans (total)
China Financial institution loans (med & long term)
CNY trn outstanding, seas adj
CNY trn outstanding, sa, med- and long-term
46
18% rate
30
47%
42
Jul10
25
Jul10
38
34
41% rate
Jun09
20
42%
Dec09
30
26
17% rate
Nov08
15
21%
Nov08
22
Jan-07 Jan-08 Jan-09 Jan-10
10
Jan-07 Jan-08 Jan-09 Jan-10
The bottom line is that with this sort of demand growth –
consumption, investment and loans – it is very hard to be
bearish about the growth outlook in China or Asia more
generally. GDP or the PMIs can slip for a quarter or two
because they are supply-side measures and lots of things
can temporarily interrupt supply. But at the end of the day,
supply follows demand like a 4-year old follows his mother.
So long as demand continues to grow as steadily and as
strongly as it appears to be doing, supply / GDP will never
be more than a step or two behind.
Sources:
Data for all charts and tables are CEIC and Bloomberg
Page 22

Regional ETF Focus
Get set for a liquidity rally
Chinese yuan (Philip Wee, philipwee@dbs.com, extracted from “Pause first” – Economics Markets
Strategy, 11 Sept 2020)
Moving towards a more flexibility basket
Look for the Chinese yuan issue to be politicized again into
a culmination of major events in November. Apart from the
US mid-term elections, the G20 summit and the IMF fiveyear
review are all scheduled to be held in November. The
US Treasury is also due to release its semiannual Currency
Report in mid-October.
The push on the yuan is likely to focus more on carrots than
on sticks this time. To encourage China to fulfil its role as a
responsible major economy, especially now that it has
overtaken Japan as the world’s second largest economy.
China’s voting rights in the IMF is likely to be increased to
reflect its economic clout. The yuan is, however, unlikely to
be included in the Special Drawing Right because the
exchange rate is still not market-determined and fully
convertible on the capital account. The US Treasury may
delay its Currency Report, like it did with the previous report,
with pressures from US lawmakers to name China a
currency manipulator. The US may, but to a lesser extent,
rally other emerging countries to pressure China for more
yuan gains. We don’t discount China responding with more
flexibility via a wider trading band for USD/CNY.
China introduced more yuan flexibility on June 19, one
week before the G20 summit. A “basically stable” yuan
policy was adopted from July 2008 during the US-led global
credit crisis into the EU sovereign debt crisis this year. Since
PBOC: CNY appreciation pace linked to CA surplus
8
7
6
5
4
3
2
1
0
-1
Current account
% of GDP
CNY vs USD
% YoY
02 03 04 05 06 07 08 09 10
the start of the year into June 18, USD/CNY traded within a
narrow 0.04% band between 6.8229 and 6.8259. The
currency pair fell to the year’s lowest level at 6.7670 on
August 9, achieving only 0.9% gains for the yuan vs the
greenback. Since then, USD/CNY has traded back above
6.80, making good the government’s pledge to move
towards a two-way exchange rate market.
The People Bank’s of China (PBOC) took on a more visible
role in setting some “ground rules” for managing the
exchange rate. The current account was highlighted as the
most important factor in determining the appropriate
exchange rate (see chart below). A more flexible exchange
rate was also considered as helpful in combating inflation.
Also notable was the desire to shift the reference of the
yuan from simply the dollar towards a basket of currencies.
Looking beyond the current (fourth) quarter, China is likely
to let the yuan appreciate more in 2011. The decision to
allow a more flexible yuan probably coincided with the full
recovery in exports to pre-crisis levels, which in turn,
augmented prospects for the trade surplus to widen again.
Another notable trend was the continued rise in China’s
inflation amidst disinflation in the US. We also expect the US
dollar to depreciate next year when recovery hopes displace
slowdown worries in the global economy. Hence, we remain
comfortable in our call for the yuan to appreciate by 3% in
2011.
Trade surplus rising again on export recovery
1600
1400
1200
1000
800
600
400
200
0
USD bn,
12mth rolling sum
Imports
(lhs)
Exports
(lhs)
Trade balance
(rhs)
02 03 04 05 06 07 08 09 10
600
500
400
300
200
100
0
Sources:
Sources for all charts and tables are Bloomberg . Forecasts are DBS Group Research.
Page 23

Regional ETF Focus
Get set for a liquidity rally
India (Underweight) (Joanne Goh, joannegohsc@dbs.com)
Near term outlook
We are less negative on India compared to the last quarter.
Growth seems to be losing steam but we believe it is
normalizing after the scorching pace in the previous quarter,
notwithstanding the higher inflation and rates hikes that
could also possibly dampen demand.
The reform agenda supports a longer-term positive outlook.
It is also enough to support the 8% GDP growth target as
well as alleviating the high budget deficit and inflation
concerns in the near term.
While strong nominal GDP growth could be positive for
earnings growth in India, we are cognizant of higher
operating costs eating into profits especially after recent fuel
and wage hikes. Inflation at its extreme may also snap
consumer demand and hurt top line growth, in our view.
Valuation in India is expensive and earnings expectations
barely changed throughout the year. We suspect Sensex will
continue to rise and thus valuations as well as risk for the
market.
We maintain Underweight on India on valuation grounds.
Drivers:
• The economy is primarily driven by domestic
consumption. Long term infrastructure development and
the need to improve living conditions (reduce slum areas,
improve education and reduce poverty) imply long-term
potential growth of 7.5%. The growth rate may be
understated considering the huge population and the
government's recent reform efforts.
• Post re-election of the ruling UPA government last year,
the government is expected to step up its reform efforts
and better quality growth can be achieved.
• We believe growth can surprise on the upside following
the 2010/11 budget, which is thought to be wellbalanced.
Government forecasts 9% growth this year
and double-digit growth rates in the coming years.
• Relaxation in FDI rules and capital flows should encourage
more investor flows into India. Stock market reforms like
privatization and increase in foreign ownership will
improve market efficiency.
• A strong domestic savers' pool contributes to the longterm
growth potential of the market.
Risks:
• India valuations trade towards the higher end of the
range and do not provide enough cushion should risk
aversion persists. The market is more volatile than most
Asian markets.
• Supply constraints as a result of under-investment will
continue to challenge the inflation outlook in our view.
Fig. 18: Singapore and Hong Kong listed ETFs exposed to the India market
ETF Ticker Mkt Cap Style Country/ Underlying Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Region Index Price INAV Discount Volume Value (US$m)
Tracker 15-Oct (latest) (20 day) (20 day)
Singapore listed ETFs
IS MSCI INDIA INDIA SP Equity 1038 Country Fund India MXIN 8.37 8.35 0.1% 554,305 4.503
Lyxor MS India INR SP Equity 303 Country Fund India MXIN 18.63 18.51 0.6% 863 0.016
DBXT MSCI India LG8 SP Equity 4 Country Fund India NDEUSIA 11.68 11.77 -1.0% 17,386 0.198
DBXT Nifty XNIF SP Equity 534 Country Fund India NIFTY 141.67 141.43 -0.1% 4,508 0.627
Lyxor India Nifty S$ LNFU SP Equity 46 Country Fund India NIFTY 18.30 18.01 0.9% 1,813 0.022
Hong Kong listed ETFs
iShares Sensex Tracker 2836 HK Equity 289.9 Country Fund India SENSEX 20.30 20.25 0.6% 1,234 3.126
Lyxor MSCI India 2810 HK Equity 301.0 Country Fund India MXIN 144.70 143.54 1.0% 6 0.106
DBXT S&P CNX Nifty 3015 HK Equity 534.7 Country Fund India NIFTY 1095.00 1097.47 0.0% 0 0.068
Source: Bloomberg. Notes: HK-listed ETFs - Vol in ‘000s, Price and NAV are in HKD unless otherwise stated. SG-listed ETFs – Actual vol traded, Price
and NAV are in US$ unless otherwise indicated.
Page 24

Regional ETF Focus
Get set for a liquidity rally
India : Overheating or slowing (Ramya Suryanarayanan, ramya@dbs.com, extracted from same
name report)
• The sharp slowdown in June industrial production
growth (in YoY terms) has led to worries about an
imminent slowdown. Only a few months ago, the
sharp rise in the same rate led to worries about
overheating
• The economy neither went through a phase of
overheating nor slowing, rather a temporary surge in
demand (owing to pent-up factors such as recovery
from the post-Lehman shock) and is now seeing a
phase of normalization that may well include an
“undershoot”
• We continue to forecast 8.8% growth in FY10/11,
slightly above-consensus. We also expect the central
bank to continue with rate hikes until at least Mar11.
We forecast another 75bps of rate hikes in the repo
rate and another 100bps of hike in the reverse repo
rate by Mar11
• There has been some progress on the reform front,
notably on oil pricing and a reduction in government
stakes in public sector companies. We expect progress
on tax reform, land reform and further liberalization of
FDI to support investment and growth
Summary
If worries about the evolution of the European debt crisis
was the dominant concern in the markets in the Apr-Jun
quarter, presently, worries about a double-dip recession in
US and China are the risk factors keeping markets edgy. Our
take in the Apr-Jun quarter was that a slower Europe
(assuming no full-blown financial crisis) by itself would not
derail global growth since Europe follows global growth,
not leads it. Given our view on the importance of China to
global and Asian growth, the prevailing uncertainties are
more serious. However, we also believe final consumption
(and investment) demand growth in China remains resilient
and will continue to support growth in China. In fact, we
think growth in the second half of 2010 in China would be
better than 2Q. US consumer demand, while weaker than
thought earlier, (following significant backward revisions to
the past year’s data) is expected to grind higher at a two
percentage annual pace. As such, we think current mixed
global data trends are only a reflection of normalization in
demand and / or temporary weakness in the supply
response. Even as uncertainties hounded the global
recovery, we upgraded our FY10/11 (Apr-Mar) GDP forecast
for India in late July to 8.8% from 8.3%. Available data so
far, including GDP for Apr-June quarter which grew by
8.8% (YoY) support our view. While data out of India has
also been more mixed of late, we do not perceive anything
more than a much necessary normalization in the economy
(Chart 1 & 2).
Chart 1: GDP contribution by sector
% YoY
11
8
5
2
-1
Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10
Services
Construction
GDP
Latest: Apr-Jun10
Industry
Agri
Chart 2: GDP by expenditure – breakdown unreliable
% QoQ saar, 2qma
15
10
5
0
-5
-10
Mar-07 Mar-08 Mar-09 Mar-10
Consumption
Errors
Neither overheating nor slipping back
Errors too
large
Investment
GDP
Is the Indian economy overheating This was the worry in
Apr-May as industrial production growth registered 14%
(YoY) and inflation galloped to double digits. Now with
production growth halving to 7% (YoY) in June, the worry is
Page 25

Regional ETF Focus
Get set for a liquidity rally
that the economy has lost momentum and inflation and rate
hikes are slowing growth. Our take is India was neither
overheating nor is slowing now. The year-on-year numbers
are misleading and lagging by definition as it cumulates
monthly growth that took place in the past twelve months.
In our reading, what has actually transpired is growth
slowed more than fundamentals dictated in Oct08-Jun09
owing to market panic and from Jul09-Mar10 the economy,
especially the industrial sector, grew at a scorching pace, to
offset the earlier weakness. In other words, the economy
was not overheating, but only growing at a temporarily
strong pace (Chart 3). To be sure, this did lead to some
temporary price pressures as capacity constraints were
reached, and this, combined with supply-shocks that pushed
food prices higher, fanned concerns of overheating.
Chart 3: Capital goods – neither overheating nor
slowing . just normalizing
Index 1993/94=100, SA, 3mma
620
...nor
slowing
570
Neither
520
overheating..
470
420
370
Latest:
320
May 09 Jun10
270
220
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
In the Apr-June quarter, we witnessed a “slowdown” in
production reflecting what we think is a “normalization” in
demand. Since such production adjustments don’t happen
in a straight line – after all businesses operate with
imperfect information in an uncertain world, – there is a
good chance that we have also seen some “undershoot”.
Therefore, in the interim, the data may paint a picture of an
economy that has run out of steam. All this is most
dramatically illustrated in the most cyclical component of
the economy — investment demand (Chart 3, above).
Rather than extrapolate the present “slowdown”, we read
the recent data as a normalization to trend, and one that
may lead to some volatility in data for a quarter or so. In
fact, not all data even point to a normalization in India.
While industrial production for June and core production (a
sub-index) for July have slowed, manufacturing and services
PMI, as well as other indicators such as loan growth and
vehicle sales remain very strong (Chart 4 & 5).
How one interprets the data is obviously important as one
projects future growth and inflation. We think the
“undershoot” in some sectors points to a stronger quarterly
pace of growth in the current Jul-Sep quarter (in QoQ saar
terms) and then a return to potential growth rates of 8%
(QoQ, saar) following that. We expect rate hikes and
inflation to temper the growth momentum but not kill
growth.
Inflation - headline to moderate, core to pick up
We expect core inflation pressures to rise with the renewed
growth momentum and this clearly requires a normalization
in policy interest rates. However, the current double-digit
headline inflation rates (in YoY terms) clearly overstates the
pressures as it is distorted by higher food prices and a low
base of comparison. Additionally, faced with a sudden surge
in demand (which was partly due to pent-up forces), supply
could not respond especially when capacity constraints were
reached. All these factors led to upward pressure on prices.
As such, by Mar-11, we expect headline inflation to ease to
under-5% (Chart 6), even as core inflation picks up. The
inflation forecast assumes the central bank hikes interest
rates in line with our forecast. We project the repo rate at
6.50% by Mar-11. At next week’s policy meeting, we
expect the central bank to raise the reverse repo rates by
25bps to 4.75% but leave the repo rate unchanged at
5.75%.
Renewed push for reform to support growth
So what’s holding up demand The firming up of the labour
market, resilience in software exports and the renewed push
for economic reform all help to support domestic demand
growth. The government has already taken some steps on
the oil price reform front in late June liberalizing the pricing
of petrol, raising the price of kerosene and LPG sharply and
promising to free diesel pricing too. Disinvestment and tax
reform are other policies seeing some progress. This should
support investor sentiment, key to energise investment
spending and support the 8% growth rate. We have also
seen improvement in rural infrastructure as well as rural
employment opportunities and safety-nets. These efforts
and steps help support rural demand and agriculture (even
as it is dwarfed by the challenges the rural economy and
agriculture sector face).
The reform agenda includes ambitious direct and indirect
tax reform, oil price reform, lifting of FDI limits in sectors
such as insurance, retail, education, divestment of
government stakes in public sector companies, introduction
of new and fair land rehabilitation laws, introduction of
biometric unique identity cards (there is no nationwide
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Regional ETF Focus
Get set for a liquidity rally
identity card at present) and pursuit of further openness and
trade liberalization. While we do not expect the government
to deliver on all these fronts in the near-term, concrete
progress on even some of these in a multi-year time frame
will go a long way to support consumer and investment
demand. It would be a mistake to doubt the sustainability of
India’s growth on the basis of the progress (or the lack
thereof) on reform thus far. It is clear to successive
governments that political success depends on delivering
high and inclusive growth. The government will never be
able to do all it has to do to support growth (the ruling
coalition is fractured and only enjoys a slim majority) or be
ahead of the curve in galvanising growth. But it is more
than keen to ensure GDP growth stays above 8% and
moves further up to 9% and above in the medium-term.
Risks
One of the main risks facing the economy arises from the
higher fiscal deficit and the supply-constrained nature of the
economy (both not unrelated). Despite collecting three
times as much money as the targeted INR 300bn in thirdgeneration
telecom auction licences this year, the
government has said that the fiscal deficit would not be
lower than initially planned. The government’s strategy is to
use all money possible on social spending. That is fine if it
were mainly education and health. However, the
government continues to spend significant amounts on
wasteful and ill-directed subsidies that do not reach the
targeted recipients (the latest addition are planned increase
to food subsidies). There is a legitimate place for food
subsidies, and such would also help halt the erosion of
political capital (and hence reform momentum) from higher
inflation. However, the larger fact is short-term and
demand-side policy management continues to dominate the
government’s strategy at the expense of sustainable supply
side reform (infrastructure, education spending, agriculture
investment). The risk then is not as much slow growth as it
is that inflation (and fiscal deficit) will not be as low as it
could otherwise be.
Sources for charts and tables are CEIC, Bloomberg and DBS Research (forecasts and data transformations)
Page 27

Regional ETF Focus
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Korea (Overweight) (Joanne Goh, joannegohsc@dbs.com
Near term outlook
The outlook for KOSPI is positive given its competitive
valuations and currency. Its domestic economy is poised to
pick up after exceptional corporate profits and continuous
fiscal support from the government.
Korea is emerging from the European crisis as an
unexpected beneficiary. The cheaper Won and the stimulus
programs by the government played an important role in
exports recovery last year. The fear of unwinding stimulus
and policy actions created an overhang in the market earlier
in the year when global recovery gathered pace. With rising
global uncertainties, the Korean government continued with
the fiscal expansion, including maintaining a cheaper won.
Drivers:
• The Korean market remains largely a macro story on the
direction of interest rates, exit strategies and Won
direction. Positive surprises can come in the form of a
delay in rate hikes, a stable Won, and the extension of the
pro-growth strategies. These look likely now in view of
the European crisis raising external risks.
• 3Q financial results are expected to be strong, as the
Korean won remains fairly stable. The outlook should be
positive given Japanese Yen's strength against Korean
Won.
Risks:
• Stimulus exit strategy can potentially derail growth, which
should otherwise benefit from a synchronized global
upturn. Government stimulus has been higher than most
Asian countries.
• SMEs are always a major concern in Korea as the
government assistance in this sector is substantial. The
sector holds the key to social and economic stability as it
hires a big labour force and the banks are highly
leveraged to this sector. SME reform has been slow and
remains a sensitive issue to banks' NPLs and the labour
unions. The Korean discount will be there as long as the
overhang remains and SMEs reform is delayed.
• Government's intervention in the private sector is large
when compared to other countries. This could be due to
the country having been hit hard by several crises in the
past decade.
• Sentiments are affected by political tensions in the North
Korea Peninsular.
• Local investors hold a big portion of Korean equities
through mutual funds and savings scheme. Korea is
considered expensive from a historical perspective.
Redemption pressure will cap market upside when the
market starts moving up, unless foreign investors buy in a
big way.
• Korea valuations are deemed cheap on a regional basis.
Foreign investors will continue to be attracted to the
cheaper valuations vis-a-vis other markets.
• Leading indicators for the Korean economy are turning
southwards. There is a risk that recovery could be stalled.
Fig. 19: Singapore and Hong Kong listed ETFs exposed to South Korea market
ETF Ticker Mkt Cap Style Country/ Underlying Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Region Index Price INAV Discount Volume Value (US$m)
Tracker 15-Oct (latest) (20 day) (20 day)
Singapore listed ETFs
Lyxor Korea KRW SP Equity 66 Country Fund South Korea MXKR 4.79 4.78 -0.1% 54,066 0.245
DBXT MSCI Korea XMKO SP Equity 247 Country Fund South Korea MXKR 54.05 54.00 -0.2% 8,397 0.428
Hong Kong listed ETFs
Lyxor MSCI Korea 2813 HK Equity 66 Country Fund S. Korea MXKR 36.85 37.08 -0.3% 62 0.282
DBXT MSCI Korea 2848 HK Equity 248 Country Fund S. Korea MXKR 418.40 418.93 0.0% 0 0.017
Source: Bloomberg. Notes: HK-listed ETFs - Vol in ‘000s, Price and NAV are in HKD unless otherwise stated. SG-listed ETFs – Actual vol traded, Price
and NAV are in US$ unless otherwise indicated.
Page 28

Regional ETF Focus
Get set for a liquidity rally
Korea : Currency stimulus at work (Ma Tieying, matieying@dbs.com, extracted from same name
report, 11 September 2010)
• Despite widespread expectations for slower global
growth, a weak won and a strong yen are helping
Korean exports, hence growth. The current account is
naturally benefiting too
• A weak property market has been a drag on the
domestic sector. Whilst the government eased
regulations on mortgage lending, the central bank has
been hiking interest rates. Subpar consumption growth
will continue
Export engine remains intact
Korea’s real GDP growth recorded 6.0% (QoQ saar) in 2Q,
slightly lower than 8.8% in 1Q. Growth was largely driven
by exports (32.1%), facilities investment (41.9%) and
inventory rebuilding. By contrast, private consumption
stayed slightly below the long-run growth rate of 4% for
the third consecutive quarter (3.4% in 2Q). And
construction investment fell significantly by -13.7% owing
to the sluggishness in the residential property market.
Going forward we remain constructive on Korea’s export
outlook, despite widespread market expectations of a
Chart 1: Korean exporters gaining market shares overseas
12
10
8
% in China's imports US EU
9.9 10.1
slowdown in global economic growth. Amid the post-crisis
global recovery starting from early-2009, Korea has
demonstrated its export strength relative to the regional
competitors especially Japan. Korean exporters have gained
market shares in major overseas markets including the US (a
share of 2.5% of US total imports in 2009-1H10, up from
2.3% in 2008), EU (2.7%, up from 2.5%) and also China
(10.1%, up from 9.9%, Chart 1). A weak won is
undoubtedly an important stimulus for Korean exports and
this stimulus remains intact in the near term, given that the
won stays almost 20% cheaper than its pre-crisis level of
1000, while the yen has recently appreciated to a 15 year
high of 84 (Chart 3). Meanwhile, the non-price
competitiveness of Korean exports is also strong thanks to
technology advantages and brand recognition. Note that
during 2004-2007 when the won appreciated a cumulative
25% against the yen within four years, Korea’s export
volume growth still outperformed Japan persistently (Chart
4). Strong technology gains are reflected in growth of labor
productivity. Korea’s manufacturing labor productivity rose
by 9.3% YoY on average during 2004-2007, in sharp
contrast with the 2.7% gains in Japan.
Chart 2: Japan losing market shares
16
14
12
10
13.3
% in China's imports US EU
12.5
6
4
2
0
2.3 2.5 2.5 2.7
2008 2009 1H10
8
6
4
2
0
6.6
6.2
4.8 4.5
2008 2009 1H10
Chart 3: The won weakening against the yen
16
1500
15
14
13
JPY/KRW (LHS)
USD/KRW (RHS)
1400
1300
12
Latest: Aug10
1200
11
10
1100
9
1000
8
7
900
6
800
Jan-04 Jan-06 Jan-08 Jan-10
Chart 4: Korea’s exports outperformed Japan’s even
before the crisis
% YoY, 3mma
50
40
Latest: Jun/Jul10
30
20
10
0
-10
-20
-30
Export volume: KR
-40
JP
-50
Jan-04 Jan-06 Jan-08 Jan-10
Page 29

Regional ETF Focus
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On the domestic front, the drag from the property market
weakness is unlikely to fade soon. Since the authorities
tightened regulations on financial institutions’ mortgage
lending in 2H09 to preempt the risks of property bubbles
and household over-leveraging (via the debt-to-income ratio
and loan-to-value ratio), the volumes of residential property
transactions have fallen significantly from the peak seen in
mid-09 (Chart 5), and housing prices have slipped monthon-month
recently in 3Q10. In end-August the government
decided to ease the debt-to-income requirement for firsttime
homebuyers and owners of one residence. This would
help avoid penalizing genuine homebuyers without relaxing
its guard against property bubbles. The decision of partially
relaxing the lending rules also came after the central bank’s
rate hike in July, as interest costs for household borrowers
are already on the rise. The Bank of Korea (BOK) has raised
the benchmark 7-day repo rate by 25bps in July from 2.0%
to 2.25%. Although the BOK held rate steady in August-
September, it left the door open for more hikes, as hinted in
the latest policy statement on Sep.9. The BOK
acknowledged external risks stemming from US slowdown
and fiscal woes in Europe, but maintained a view that the
Korean economy will register “solid growth” in the coming
months, and inflation will accelerate as “the demand-side
pressures increase”. We expect the BOK to continue
normalizing interest rates step by step towards a neutral
level of 4-5%. We don’t expect a double-dip recession in
the global economy. A slower-than-expected global growth
could slow the pace of policy normalization in Korea, but
will unlikely alter the direction of higher interest rates. We
project that the policy rate will go up to 2.75% by the end
of 2010, and 4.0% by the end of 2011.
Chart 5 : The property market has cooled
Unit, th
160
140
120
100
80
Apartment
transactions volume
Seoul (RHS)
'
Latest: Jul10
Unit, th
30
25
20
15
Macro stability improving
The macro stability has improved somewhat in Korea. The
current account registered a larger-than-expected surplus of
USD 17.5bn in the first seven months of this year (1.8% of
annual GDP), already hitting our whole-year forecast for the
current account balance (Chart 6). Aside from the strength
in exports and weakness in the won as we elaborated
above, the slower-than-expected rises in international oil
prices have also saved costs for Korean importers.
Accordingly, we have lifted forecast for the current account
in 2010, to USD 28bn or 2.9% of nominal GDP.
Meanwhile, the government’s fiscal balance is improving
continuously. In the first half of this year the central
government’s total revenue grew 7.5% YoY, compared to
the -4% reduction in expenditures, which left the
consolidated fiscal balance at a small deficit of KRW 11.4trn,
or 1% of annual GDP. The government well understands
the importance of maintaining fiscal disciplines and
protecting fiscal sustainability. Whilst the finance ministry
proposed a tax revision plan in August to offer tax incentives
for companies to create jobs and support the low-income
class, it also removed other forms of unneeded tax
exemptions. The official projections show that the net
impact on overall tax revenue will still be positive, at KRW
1.9trn over the next five years.
In addition, the upward tendency in the country’s gross
external debt has been checked recently in 2Q. External
debt as a percentage of external assets (or foreign reserves)
is falling or at least, stabilizing (Chart 7). This is partly owing
to reduced risk appetite in global financial markets amid the
worsening of European debt crisis in 2Q. The Korean
financial regulator has also intervened in June to tighten FX
regulations (such as capping FX derivatives trading of both
local and foreign banks, reinforcing rules on companies’ use
of FX loans). Whilst these controls would dampen capital
inflows and slow the recovery in the Korean won, reducing
banks and companies’ dependence on external financing
especially short-term borrowings should bode well for the
stability in the financial system and also the overall
economy.
60
40
20
0
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
10
5
0
Page 30

Regional ETF Focus
Get set for a liquidity rally
Chart 6: Current account maintained strong surplus
USD bn
8
6
4
2
0
-2
Goods
Services
Total
-4
Latest: Jul10
-6
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Chart 7: External debt stabilized
%
120
100
80
60
40
20
External debt / External
assets
ST external debt/Foreign
reserves
Latest:
2Q10
0
1Q01 2Q02 3Q03 4Q04 1Q06 2Q07 3Q08 4Q09
Sources for charts and tables are CEIC, Bloomberg and DBS Research (forecasts and data transformations)
Page 31

Regional ETF Focus
Get set for a liquidity rally
Taiwan (Underweight) (Joanne Goh, joannegohsc@dbs.com)
Near term outlook
We expect Taiwan market to be affected by a downshift in
economic activities in 4Q brought about by the weakened
external environment. Export orders going into the 4Q is
showing signs of flattening, which signals a peaking in
industrial activities by the end of the year. Unless the US and
China surprise otherwise, there are concerns that the strong
tech upswing may have run its course.
Domestic demand is expected to pick up following the
conclusion of ECFA (Economic Cooperation Framework
Agreement) in June. The benefiting sectors are the retail,
hospitality and tourism sectors. However the impact on
domestic demand could be overstated following the initial
surge in tourist arrivals from mainland.
We expect China-Taiwan relationship to stall for the
moment before the Taiwan municipality elections on
November 27. It may not be wise for Ma Ying-Jeou to play
the China cards as his pro-China policies may have affected
his popularity. China may also want to wait for the
elections results, which is an indication of Ma Ying-Jeou’s
winning chance in the 2012 presidential elections. All said
the focus in the 4Q will be the elections.
Taiwan is much at risk if the US slowdown accelerates.
Likewise our underweight on Taiwan could be at risk if
things actually turned out to be better. That said with the
leading indicator already peaking, we expect the index to
consolidate at current levels, pending on any clarity on the
outlook.
Drivers:
• Domestic demand is poised to pick up following the
improved economic conditions after ECFA.
• Positive news flows from the financial MOU and ECFA.
• Favorable interest rate environment and positive pre
election market sentiment.
Risks:
• Domestic political noise could slow down the progress of
Ma Ying-Jeou's economic reform process.
• High leverage on G3's growth if growth recovery
disappoints.
Fig. 25: Taiwan index vs leading indicator
11000
10000
9000
8000
7000
6000
5000
4000
3000
2000
01 02 03 04 05 06 07 08 09 10
TWI (L)
Source: Datastream
Fig. 21: Singapore and Hong Kong listed ETFs exposed to Taiwan market
Leading indicator (R)
ETF Ticker Mkt Cap Style Country/ Underlying Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Region Index Price INAV Discount Volume Value (US$m)
Tracker 15-Oct (latest) (20 day) (20 day)
Singapore listed ETFs
DBXT MSTaiwan XMTW SP Equity 160 Country Fund Taiwan NDEUSTW 17.48 17.47 -0.3% 15,347 0.265
Lyxor Taiwan TWN SP Equity 62 Country Fund Taiwan TAMSCI 0.97 0.98 -1.0% 87,010 0.084
Hong Kong listed ETFs
Lyxor MSCI Taiwan 2837 HK Equity 62.6 Country Fund Taiwan TAMSCI 7.51 7.60 -1.0% 160 0.153
DBXT MSCI Taiwan 3036 HK Equity 161.6 Country Fund Taiwan NDEUSTW 135.20 135.52 0.1% 1 0.010
POLARIS TAIWAN TOP50 3002 HK Equity 25.9 Country Fund Taiwan TW50 12.18 12.43 -1.9% 40 0.062
C-TRACKS Bldg/ Constr. 10800 HK Equity 0.1 Sector Funds China TWSECON N/A 3.25 N/A - N/A
C-TRACKS TAIEX Electron10801 HK Equity 0.0 Sector Funds Taiwan TWSEELEC N/A 3.39 N/A - N/A
C-TRACKS TAIEX Finance10802 HK Equity 0.1 Sector Funds Taiwan TWSEBKI 9.50 8.85 0.08 - N/A
Source: Bloomberg. Notes: HK-listed ETFs - Vol in ‘000s, Price and NAV are in HKD unless otherwise stated. SG-listed ETFs – Actual vol traded, Price
and NAV are in US$ unless otherwise indicated.
130
120
110
100
90
80
70
60
Page 32

Regional ETF Focus
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Taiwan: Slower, more balanced growth (Tieying Ma, matieying@dbs.com, extracted from
same name report, 11 September 2010)
• Growth is expected to slow and to come more evenly
from exports and domestic demand. Exports are
flattening; the domestic outlook is improving
• Asset inflation is a concern. Interest rates are far below
neutral and the banking system is flush with liquidity as
a result of strong external surplus, continued FX
intervention and incomplete sterilization. The central
bank has so far hiked rates only in baby steps (12.5bps
per quarter). Bigger steps will be on the horizon
Slower exports, improving domestic outlook
Taiwan’s real GDP growth decelerated to 7.2% QoQ saar in
2Q from 10.9% in 1Q, mainly because of slower growth in
exports and inventories. Exports, as the foremost factor
affecting Taiwan’s near-term economic trend, are likely to
continue softening ahead in light of a less favorable global
environment (inflation challenges in emerging markets and
fiscal constraints in advanced economies). Taiwan’s export
orders, as a leading indicator for actual exports in the next
1-3 months, have exhibited a flattening trend in the entire
second quarter and in July (Chart 1). Having said that, we
also need to point out the resilience of the industrial sector.
Manufacturing inventory remains lean, with the inventoryto-shipment
ratio staying subpar at only 0.87 as of June
(Chart 2). Manufacturers are reluctant to expand production
and accumulate inventories in anticipation of weaker sales
outlook in the overseas markets. Should the performance of
final demand turn out to be better than expected, industrial
output can bounce back resiliently.
Chart 1: Export demand cooling off
volume, sa, 2006=100
150
140
130
120
110
100
90
80
Export orders (LHS)
Exports (RHS)
value, sa, USDbn
Latest:
Jul/Aug10
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
30
26
22
18
14
10
Chart 2: Inventory remaining at low levels
% 3m/3m saar Ratio
90
0.4
70
50
30
10
-10
-30
-50
-70
-90
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
The domestic growth outlook is improving on the other
hand. The cross-strait Economic Cooperation Framework
Agreement was signed successfully in June, and approved
by the Taiwanese legislation in August. Effective beginning
next year, China will lower tariffs for Taiwanese exporters
on 539 goods items (16% of China’s total imports from
Taiwan) and ease market entry conditions for Taiwanese
services suppliers in 11 sectors (such as financial, medical,
computer and R&D). The ECFA should strengthen Taiwan’s
trade competitiveness over time and boost investment and
hiring activities in the corporate sector. The near-term
effects are reflected in sentiments. Consumer confidence
has climbed to a 6-year high on the back of stronger
expectations about general economic climate and
employment opportunities (Chart 3). This is in contrast with
the regional phenomenon of slipping confidence and
growing worries about global slowdown.
Chart 3: Consumption growth holding up
points
85
80
75
70
65
60
55
50
45
40
Inventory-shipment ratio:
manufacturing (RHS)
Industrial production
(LHS)
Latest: Jun/Jul10
Latest: Jul/Aug10
Consumer
confidence (LHS)
Retail sales (RHS)
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2006=100, sa, real
112
108
104
100
96
92
88
84
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Regional ETF Focus
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Meanwhile, deregulation of the cross-strait direct
transportation and tourism (since 2H08) may be yielding
positive return. Though it is not easy to identify whether the
growth in Taiwan’s services industry is cyclical or structural
because of the sharp swing in global economic cycle as a
result of the financial crisis, one interesting observation is
that services employment recovered ahead of
manufacturing employment, particularly in the sub-sectors
of accommodation and food services (Chart 4). This is
probably a sign demonstrating the benefits realized from
cross-strait links of tourism and transportation.
Chart 4: Services employment vs, manufacturing
persons, th
6250
6150
6050
5950
5850
5750
5650
Latest: Jul10
Services (LHS)
Manufacturing (RHS)
persons, th
3000
2950
2900
2850
2800
2750
2700
2650
The risks to asset inflation are still on the upside, as the
current monetary policy remains highly accommodative and
interest rate levels are far below neutral. Although the
central bank raised the benchmark discount rate for the first
time since crisis, by 12.5bps in June, the hike has had little
impact on market rates (Chart 6). This is because of
abundant market liquidity resulting from still-strong external
surplus, continued FX intervention and incomplete
sterilization, as well as competition amongst the banks.
Note that official foreign reserves increased by USD 9.7bn in
the Jul-Aug period to a new record high of USD 372bn, and
base money growth has reached double-digit rate on the
sequential basis (15.8%.3M/3M saar as of July). Moreover,
Taiwan’s central bank schedules monetary policy meeting
only once every three months. The process of interest rates
normalization will naturally take longer than many regional
peers (and increase upside risks to asset inflation) should the
central bank continue raising rates in baby steps of 12.5bps
each meeting.
Chart 6: Interest rates at ultra-low levels
% pa
7.5
6.0
Policy discount rate
New loans rate
O/N interbank rate
5550
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
2600
4.5
Latest: Jul10
Asset inflation is a concern
Asset inflation is a concern in Taiwan. Residential property
prices have continued to rise sharply, with the Sinyi price
index (for existing home sales) registering a 12.7% YoY rise
during 2Q, and the Cathay index (for new home sales)
gaining 9.1% YoY (Chart 5). This is despite the central
bank’s attempt to cool the property market through
mortgage regulations and moral suasions in the second
quarter.
Chart 5: Housing prices continued risisng
Index
170
150
130
110
90
Sinyi Housing Price:
Mar91=100
Cathay Housing Price:
2006-2008=100
3.0
1.5
0.0
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10
Policymakers will have to be cautious about the impacts of
low interest rates on asset markets and overall financial
stability. Lesson learnt from the 2008 global financial crisis is
that loose monetary policy can fuel asset bubbles and
excessive leveraging. We think the central bank would have
to accelerate the pace of monetary policy normalization
sooner or later. In our interest rate forecast, we have
penciled in a 12.5bps hike at the upcoming policy meeting
in end-September, followed by 25bps hike per quarter from
4Q onwards till end 2011. The risks to our forecast mainly
stem from external factors such as weaker-than-expected
growth performance in the US and China.
70
Latest: Jun10
50
Mar-98 Mar-01 Mar-04 Mar-07 Mar-10
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Regional ETF Focus
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Fiscal concerns subsided
Market concerns about Taiwan’s fiscal deterioration have
subsided, because of the resilient recovery in the real
economy and improvement in government revenue. During
the first seven months of this year, the general
government’s tax revenue increased a solid 5.3% YoY. In
June rating agency S&P revised Taiwan’s sovereign credit
rating outlook to “stable”, withdrawing its “negative” call
during global financial crisis.
The government is also gradually removing stimulus along
with the recovery. According to the 2011 budget of the
central government proposed in August, the spending level
for next year will only stay unchanged as compared to this
year (combining the general budget and special budget for
public construction). Considering the link between expected
growth in government revenue and nominal GDP, we
reckon that fiscal deficit will narrow further to 1.6% of GDP
in 2011 from 2.1% in 2010, and public debt-to-GDP ratio
will stabilize below 40%.
Sources for charts and tables are CEIC, Bloomberg and DBS Research (forecasts and data transformations)
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Regional ETF Focus
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Indonesia (Overweight) (Joanne Goh, joannegohsc@dbs.com)
Near term outlook
We believe risks are rising in Indonesia in the near term. The
market is pricing in a lot of positives in our view. These
include an investment ratings upgrade, the belief that
interest rate will continue to stay low, and that Rupiah will
continue to strengthen. While we believe these are all highly
possible, they are not going to happen overnight.
Foreign investors' participation in the stock market is a lot
higher now than before, which means that foreign flows
have a bigger impact on the market rather than domestic
investors. Hence the re-rating in the past cannot continue as
foreigners are making regional comparisons on valuations,
risks, and sectors. There is a general fear that global
investors will turn away upon rising valuations and global
risk factors.
We need to see stronger domestic liquidity to overcome this
apprehension. With rising inflationary pressure, the fear has
been that the central bank will tighten liquidity. Last week
the central bank raised the RRR from 5% to 8% to mop up
excess liquidity, meanwhile keeping the interest rate at
current low levels. The core CPI basket was also revised.
Earlier on, the loan-to-deposit target was set at 78-100%.
Recent BI actions seem to have shaken investors’ confidence
on the central bank’s creditability, as some of the measures
are perceived to be contradictory in controlling liquidity and
inflation, and expanding loan growth. At this stage when
both BI governor and the Finance Minister are new, we
think it is important that BI manage expectations in a
credible manner, which is more important than the impact
of the actions themselves.
In our view, there are no contradictions in these policy
actions. The 300bps hike in RRR will freeze rupiah liquidity
by about IDR 53trn (USD 5.9bn) among commercial banks
according to our calculation. This is still a moderate amount,
given that banks have excess reserves of IDR 52trn placed in
the central bank, and banks’ holdings of central bank
certificates (near IDR 270trn) are also liquid. Total excess
liquidity in the banking sector is more than IDR 300trn. As
such, the RRR move may help ease the urgency to raise
interest rates in the next couple of months.
Meanwhile, BI stipulated that banks must maintain the loanto-deposit
ratio in the range of 78%-100%, starting from
March 2011. Banks that fail to meet the LDR requirement
will be penalized with additional reserve requirements. As
the current LDR level in the banking system averages at
78%, the new LDR regulation clearly targets at higher credit
growth. The LDR measure should be viewed as a mediumto-long
term strategy to improve the banking sector’s
intermediation function and enhance the economy’s growth
potential. The RRR hike represents the near-term policy
stance of tightening.
Fig. 20: Indonesia - CPI, lending, deposit and policy
rates
20
18
16
14
12
10
8
6
4
2
%
01 02 03 04 05 06 07 08 09 10
Source: Datastream
3M dep. Rate
BI policy rate
Min. lending rate
CPI inflation
DBS Economics now expects the first rate hike to be in
December. We do not expect domestic demand to be
affected by rate hikes. Lending rate is still at a wide spread
to policy rate and has been coming off. Banks are also
encouraged to lend as funds parked overnight with BI are
penalized. We continue to see a lower lending rate to
support loan demand.
Our economist views the investment upgrade as highly likely
but it remains to be seen whether it will bring an immediate
positive impact on the economy. (See "Indonesia: upgrading
expectations" by Tieying Ma included in this report.) DBS'
Fixed income strategist believes that Indonesia's bond yield
should rise if the economic outlook is good and that the
yield curve will have to rise once BI starts hiking rates. In
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short we do not think that the long-term bond yield has
room to fall from current levels even with an investment
upgrade.
Near term we believe Indonesia equities market will trade
within a volatile range. We recommend adding positions on
any significant pull back as Indonesia has consistently
offered the best risk-return reward.
Drivers:
• Indonesia's president SBY, now in his second term, has
successfully pushed his reform agenda on economic
policies and anti-corruption drive. This has translated to
higher FDI flows, improving balance of payments, and
strong private consumption growth.
• Indonesia has also been able to ride on the positive
commodity cycle. With the mining reform in place, FDI
inflows have helped with capacity expansion. The
potential challenges under the current environment
would be weaker growth and USD, which may drive
commodity prices lower. However, we expect the
continuous improvement in FDI to lift income levels and
hence private consumption growth. Indonesia is one of
the few countries that did not suffer a recession during
the US financial crisis because of the high component of
domestic demand in GDP growth.
to improve market's breadth and a higher potential GDP
growth from reform efforts.
Risks:
• There is always a fear of capital flight considering
Indonesia's large foreign bond holdings. Attractive
interest rate spreads between US and IDR also make
Indonesian bonds and bills very attractive carry play.
Hence, volatility in the equities market are closely linked
to volatility in the Rupiah.
• This is SBY's last term in the office and hence, the crucial
leadership succession will be in play. Political risks in
Indonesia have eased over the last few years under SBY's
leadership but the struggle between the reformists and
powerful vested interests is ongoing. The conflict
emerged early this year when SBY was forced to let go of
his important right hand man and that his VP was being
investigated for a bank bailout case during the US
financial crisis. This would slow the pace of reform.
• Foreign flows have a bigger impact on the market rather
than domestic investors. This means that re-rating in the
past cannot continue as foreigners are making regional
comparisons on valuations, risks, and sectors. It also
suggests that Indonesia market will be more open to
external global factors, just like the US subprime and the
Eurozone crisis.
• With the ASEAN/China FTA, 90% of products between
China and Indonesia are tariff-free. As Indonesia has the
advantage of being more cost competitive than China, we
expect manufacturing activities to pick up in Indonesia,
thereby improving income levels.
• Indonesia is still enjoying higher loan growth rates amid
rising investment and consumption. However, tight
banking regulations prevent banks from lending more. A
"shadow" banking system fills the gap for now. We
expect relaxation in banking regulations to improve loan
growth going forward.
• On this end BI has encouraged bank lending by setting a
higher L/D ratio and higher penalty overnight rates. We
continue to see loan growth to improve. YTD bank loan is
9% but seasonal effects should boost loan growth in the
second half.
• As the only Asian country with a significant commodities
exports sector, Indonesia has become an important
portfolio in emerging market funds and comparison was
made for its similarities to the "BRIC"s countries. While
lacking size at the moment, we expect more IPO listings
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Regional ETF Focus
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Indonesia: inflows & monetary policy (Tieying Ma, matieying@dbs.com, re-published from same
name report, 13 October 2010)
Foreign inflows have been strong, across financial assets
including bonds, equities and money market instruments
Inflows have not inflated the real economy thus far
• Going forward inflows will continue to rise, due to looser
monetary conditions in the advanced economies and
rising sentiment toward Indonesia. Policymakers will face
growing challenges of managing inflows
• The most likely policy option BI will choose is to reinforce
quantitative measures to absorb liquidity (RRR and OMO).
Raising interest rates will also become unavoidable when
inflation pressures increase
• Accelerating currency appreciation is not expected. And
the authorities’ stance on capital controls seems to be
cautious
Rising inflows
Foreign capital inflows have been strong ever since the
beginning of global recovery early last year, attracted by the
country’s promising economic prospects, a positive
sovereign rating outlook and high yields. From April 2009 to
September 2010, foreign holdings of Indonesian
government bonds increased a cumulative USD 13.5bn. As a
percentage of the total amount of tradable rupiah
government bonds, foreign ownership has risen to a record
high of 28%, up sharply from 15% in Apr09. Meanwhile,
foreign net purchases of equities registered a positive USD
3.6bn over the past 18 months and foreign holdings of
central bank certificates (SBI) increased by USD 4.7bn (Chart
1, 2). In total, foreign inflows into Indonesia’s bond, equity
and SBI markets have reached USD 22bn.
Inflows have not inflated the real economy
Inflows into Indonesia are not that large if compared to the
country’s economic size, however. Measured by the
increases in foreign reserves (USD 32bn since Apr09), net
inflows are equivalent to 4.5% of the country’s annual GDP.
This compares to 13% on average for all the Asian 10
economies, and more than 15% in small economies like
Hong Kong, Singapore, Taiwan and Thailand (Chart 3). This
helps explain why Indonesia’s money supply growth remains
benign at 12-13% YoY, and core inflation stays close to the
lower end of the central bank target of 4-6%. There are no
overheating problems yet in the real economy. The
inflationary phenomenon is chiefly reflected in equity and
bond prices at this moment.
Chart 1: Bond and equity inflowd surging
USD bn
2.5 Govt bond
2.0
JCI
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
2010
2008
-2.0 Latest: Sep10
European
global crisis
-2.5
crisis
-3.0
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Chart 2: Foreign inflows into SBIs also rebounding
USD bn
3
2
1
-1
-2
-3
-4
-5
-6
Latest: Aug10
2010
European
crisis
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10
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Regional ETF Focus
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Chart 3: Inflows to Indonesia not large if compared to
economic size
%
35
30
25
20
15
10
5
Changes in Foreign
Reserves (Apr09-Sep10)
/ Nominal GDP
liquidity supply. Base money still expanded by IDR 119trn
(USD 13.2bn) from Apr09 to Sep10 (Chart 4). The year-onyear
growth in base money has been advancing at 20%
YoY ever since end-09, surpassing the trend growth in
nominal GDP of 18.7% (averages in 2004-2009). Banks’
credit expansion has accelerated too, also reaching the 20%
growth rate recently from Jul10. It may not take very long
for broad money supply growth to catch up, in principle.
Historically, when M2 growth approached 20%, CPI
inflation (both headline and core) stayed sticky above 6%,
including the periods without the disruption impacts on
inflation from fuel price hikes (Chart 5).
Chart 4: Base money expanding
0
HK SG TW TH CN KR MY ID IN
But the risks are growing
IDR trn
440
Latest: Sep10
Going forward however, inflows will likely continue to
increase. With Japan recently having adopted further
quantitative easing and the US Fed widely expected to
follow soon, capital movement from advanced economies
into emerging Asia is expected to intensify. The outsized
returns from Indonesia’s financial assets year-to-date will
keep it a key investment destination in Asia.
400
360
320
IDR 119trn
Importantly, inflows into Indonesia are largely in the form of
portfolio flows (rather than FDI) which can be sensitive to
shocks to confidence and risk aversion. The potential
destabilization risks in the financial markets can not be
ignored. How to manage inflows to prevent them from
inflating the real economy and how to minimize the
volatility of flows are becoming challenges for policymakers.
The current policy mix
The current policy reaction from Bank Indonesia includes
tolerating certain appreciation in the rupiah, increasing open
market operations and hiking reserve requirement ratio to
sterilize liquidity, as well as taking prudential regulation
measures to directly guide inflows. Specifically, 1) the
dollar/rupiah rate has been allowed to dip below 9000, 2)
open market operations have been increased by IDR 62trn
(USD 6.9bn) from Apr09 to Sep10, 3) banks’ primary reserve
requirement ratio was raised by 300bps in Sep10, 4) a onemonth
minimum holding period was imposed for foreign
investment in SBI (Jun10).
280
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
Chart 5: Money supply vs. inflation
% YoY
20
18
16
14
12
10
8
6
4
2
0
Latest:
Aug/Sep10
M2 CPI Core CPI
Jan-03 Jan-05 Jan-07 Jan-09
This policy mix has not been sufficient to prevent capital
inflows from translating into an expansion in domestic
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Regional ETF Focus
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Future policies
With inflows expected to persist, what will be the key policy
responses in the future Accelerating IDR appreciation is not
expected. The USD/IDR rate has already recovered to the
2008 level, and the IDR REER currently is about only 12%
below the historical peak reached just before the 1997-98
Asian financial crisis. A strong rupiah may not damage the
competitiveness of Indonesian exports, which are primarily
comprised of commodities goods with relatively inelastic
demand in global markets. The concerns are that a strong
rupiah boosts imports and erodes trade and current account
balance, exposing the balance of payments to volatility of
capital flows. The current account surplus is already falling
and the World Bank predicts a small deficit of USD 1.2bn
next year. This is not to mention that Indonesia’s
outstanding amount of gross external debt is still 2.4 times
of foreign reserves. BI could find it necessary to accumulate
reserves and support current account balance so as to
reduce the destabilization effects stemming from a reversal
in capital movement one day in future.
In terms of capital controls, the Indonesian authorities have
been maintaining a careful stance. An impetuous move
could damage foreign investors’ confidence and cause
unwanted distortions and side-effects, undermining the
official aim of attaining an investment grade sovereign
rating as early as next year. The SBI regulation measure in
June was applied to both foreign and domestic investors
with no discrimination, and BI had been signaling the move
for several months before its implementation. A heavy form
of price/quantity controls on capital movement, such as
taxes on foreign portfolio investment and unremunerated
reserve requirement, does not seem to be on the policy
agenda.
The increases in capital inflows, an open capital account and
greater FX intervention by the central bank should lead to a
faster expansion in domestic money supply, exerting upward
pressures on inflation. In response to such risks, quantitative
measures to tighten liquidity (RRR hikes and OMO that have
been used) will likely be reinforced further. BI has been
reluctant to directly raise interest rates thus far. The
benchmark rate level of 6.5% in Indonesia is among the
highest in the region. There are understandable concerns
that a widening differential with foreign rates will invite
even more inflows. Rate hikes will become unavoidable
when inflation escalates and economic overheating
problems emerge, however. Rate hikes could also lower
investors’ expectations on economic growth and asset price
returns. We continue to expect BI to raise rates from 6.5%
to a neutral 8.0% next year (in accordance with our 2011
inflation forecast of 6.5%), although we have revised the
timing of the first hike to Feb11 from Dec10 to reflect BI’s
preference of quantitative tightening in the near term.
Sources for charts and tables are CEIC, Bloomberg and DBS Research (forecasts and data transformations)
Page 40

Regional ETF Focus
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Indonesia interest rate strategy: inflows drown fundamentals (Jens Lauschke,
jens.lauschke@dbs.com, re-published from same name report, 8 October 2010)
•
Capital flows have been strong for the past four months
and market performance has been impressive
• But asset prices are now overstating fundamentals. This is
a problem
• Government bond yields mask inflation and rate hike risks
and the equity market has outperformed regional peers
by a wide margin
• Policy makers still think that the risk of being too early in
interest rate policy tightening outweighs the risk of being
too late, but given the strength of credit and domestic
demand growth and inflationary pressure, policy makers
cannot sit on the sidelines much longer
• Investors should prepare for a more decisive response
from policy makers
Markets have delivered impressive returns
Capital flows have been strong for the past four months
and market performance, in both the equity space and bond
space, has been impressive. Despite the global financial
crisis, broad-market equity total return benchmarks are up
more than 30% since Dec-2007 and bond benchmarks
trade more than 50%.
Foreign flows into Indonesia stocks & bonds
IDR trillion
25
20
15
10
5
0
-5
-10
Bonds
Stocks
Jun-09 Dec-09 Jun-10 Dec-10
But too much of a good thing is not a good thing and asset
prices now overstate fundamentals. Government bond
yields have already fallen to levels that mask inflation and
rate hike risks and the Jakarta Composite has outperformed
regional peers by a wide.
Comparative returns
%, cumulative from 12/31/2007
80
60
40
20
0
-20
-40
-60
-80
Bonds (iBoxx Total Return Index)
Stocks (MSCI Total Return Index)
Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10
This is not all good. First, while attracted by positive longterm
fundamentals, it is likely that some of the generally
welcome foreign capital inflows during the next period of
risk aversion in global markets turn into outflows. Second,
local markets are small (the government bond market is
about 15% of GDP and the corporate bond market about
1.6% of GDP, the equity market capitalization is about 50%
of GDP) and large capital flows boosts domestic liquidity
and makes the conduct of monetary policy more difficult.
Third, the more markets move away from fundamentals, the
more likely it is that the eventual correction has an impact
on the real economy.
Moreover, excess liquidity is considerable, credit growth is
strong, and consumer prices are up 5.8% from a year ago.
These trends are likely to continue and with commodity
prices rising, the risk to the inflation outlook is now to the
upside. It is quite plausible that annual inflation rises above
6% in 2011 (year-on-year changes in CPI inflation have
averaged 8% over the past eight years).
Bank Indonesia needs to be more proactive
Judging from the inaction on policy interest rates, policy
makers still think that the risk of being too early in policy
rate tightening outweighs the risk of being too late.
Governor Nasution said in early September that “as long as
we can still manage our monetary variables by other
instruments, we will try to avoid changing the interest rate.”
Bottom line, policy makers are reluctant to use interest rates
proactively to anchor inflation expectations and reduce the
volatility in price trends. While they are becoming more
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concerned about the inflation outlook, hey continue to
reiterate the importance of supporting credit expansion and
overall economic growth.
As long as this is the prevailing perception among market
participants and risk appetite remains healthy, both the
equity market and the bond market will do well. As foreign
entities continue to absorb all of the net supply of bonds to
the market, the rich trading levels of and low yields on
Indonesian government bonds will continue to mask
inflation and rate hike risks and trade well below fair value.
Eventually, the policy rate will have to be raised from the
current record low level of 6.5% and that point is probably
not as far away as investors hope. Given the strength of
credit growth and domestic demand growth, inflationary
pressures, capital inflows, market developments and
international pressure, it is unlikely that the market will have
policy makers on its side much longer.
We think the first rate hike from Bank Indonesia could come
as early as this quarter. The hike in the primary reserve
requirement ratio in September already signals that policy
makers feel the need to act. So far, they have merely
restored banking system liquidity conditions to pre-crisis
levels and more needs to be done to anchor inflation
expectations and ensure healthy economic growth. Investors
have to prepare themselves for a more decisive response
from policy makers to current trends in the economy and
markets.
Consumer price inflation
Index, 2007=100
MoM % changes
Sep-10 Sep-10 6M Avg 12M Avg
CPI 123.2 CPI 0.44 0.70 0.47
Food 142.5 Food 0.4 1.6 0.9
Prep Food 130.9 Prep Food 0.5 0.5 0.6
Clothing 122.2 Clothing 1.1 0.6 0.4
Transport 106.4 Transport 0.6 0.4 0.2
Housing 118.8 Housing 0.3 0.4 0.3
Education 117.2 Education 0.3 0.4 0.3
Health 115.3 Health 0.2 0.2 0.2
Headline CPI inflation & 10Y Bond yield
%
20
18
16
14
12
10
8
6
4
2
0
CPI
(%YoY)
10Y Yield
(%pa)
Jul-03 Jul-05 Jul-07 Jul-09
Conclusion
As long as there is the perception that a) interest rate policy
in Indonesia will be reactive rather than proactive with
regard to inflation and b) policy remains focused on
supporting credit expansion and overall economic growth,
the music is playing and the party goes on - both in the
equity as well as in the bond market. But no party goes on
forever. With inflation risks to the upside investors have to
prepare themselves for policy makers removing the punch
bowl. Bank Indonesia has already demonstrated that it is
willing to act and interest rate hikes will soon be used to
change market perceptions that monetary policy conditions
will remain accommodative. Bond yields will rise when that
happens.
Sources for charts and tables are CEIC, Bloomberg and DBS Research (forecasts and data transformations)
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Thailand (Overweight) (DBSVickers Thai Research team)
Near term outlook
Near-term correction likely. History suggests a negative
correlation between interest rates and market PE. With (i)
policy rates rising for two consecutive months by 25bps
each from 1.25% to 1.75% now, (ii) expectations for two
more 25bps rate hikes, and (ii) many stock prices rising
sharply YTD, we expect a near-term price correction,
particularly small-mid cap stocks which prices have surged
beyond their fundamentals. Nonetheless, given that such
interest rate hikes are considered a normalization policy
rather than tightening, market correction should be minor
this time.
Upward trend should continue. With economic recovery on
track, local political tension easing, and market earnings
growth still strong at 23% in 2010F and 14% in 2011F,
Thailand will continue to attract foreign funds flow back
into the country.
Our 12-month SET Index target is still 1100. Despite the
rally, the market remains cheap at 12x 2011 PE, still below
its historical average of 13x. We remain positive and revised
our 12-month SET Index target to 1,100 based on bottom
up approach (implying 13.5x 2011F PE), which suggests
13% upside from current levels.
Switch to large-cap plays in Banks, Energy, and
Petrochemicals. We recommend investors take profit on
small/mid cap stocks which share prices have rallied ahead
of fundamentals, and switch to larger-caps in Banks, Energy,
and Petrochemicals in the near term. Banks should be prime
beneficiaries of the recovering economy. We have turned
more positive on the Energy sector following the resolution
of the Map Ta Phut case. The sector, having been a major
laggard YTD, should also benefit from rebounding oil prices.
Politics
Emergency Decree lifted in another three provinces. On 30
Sep 2010, Prime Minister Abhisit Vejjajiva lifted the
emergency decree in three more provinces - Khon Kaen,
Udon Thani, and Nakhon Rachasima. The decision came as
situation in those areas had improved such that government
officers would be able to prevent and resolve problems,
should they occur, using normal measures. The emergency
decree remains in effect in four provinces, namely, Bangkok,
Nonthaburi, Samut Prakan and Pathumthani.
Constitutional amendments. The Constitutional Reform
Committee, chaired by Dr. Sombat Thamrongthanyawong,
has reached a conclusion. The Committee proposed
changes to four of the six issues, as follows:
1) Parliamentary approval for treaties (Article 190): It
proposed that an organic law be drafted pursuant to this
article to specify the type of treaties that require
parliamentary approval and make clear the relevant
procedures that must be followed;
2) Election of members of House of Representatives (Articles
93 and 94): It proposed that changes be made to the
proportion of constituency-based and party-list
representatives from 400:80 to 375:125. As such, the total
number of House members will be increased from 480 to
500. It also proposed to revert to the election system under
the 1997 Constitution, namely, single member
constituencies instead of the current multi-member
constituencies.
3) Appointment/election of members of the Senate (Articles
111-113): It proposed that the composition of the selection
committee that appoints senators be adjusted in terms of
increasing and diversifying its membership.
4) Dissolution of political parties (Article 237): It proposed
that in the case of election fraud, the political party involved
should not be dissolved, but the political ban on the leader
and the executive board members who are found guilty be
raised from 5 years to 15 and 10 years, respectively.
The Committee is currently conducting public consultations
on its proposals, which could result in further adjustments.
When finalized, the proposal will be forwarded to the
Government for consideration by end Oct or early Nov
2010.
Economy
Thailand relaxes regulations on capital outflow. This is a
continuation of its policy to reduce the excess of inflows
over outflows, and to curb the appreciation of the baht.
Some of the key measures include:
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1) Thai residents and companies can now hold up to
USD500,000 in foreign currency accounts in Thailand
(previous: USD300,000 for companies and USD100,000
for individuals).
2) A yearly USD200 million ceiling on Thai firms investing
in or lending to affiliated companies overseas has been
scrapped. Lending to non-affiliated companies is now
permitted up to an annual limit of USD50 million.
3) Purchase of overseas property is now allowed up to an
annual limit of USD10 million (previous: USD5 million).
4) Transactions in equity derivatives by non-residents with
no physical settlement – where there is no exchange of
underlying shares – must be settled in foreign currency.
Our initial thoughts are that these measures will not alter
balance of payments significantly. In general, it is difficult
for emerging market central banks to reduce net inflows
by easing restrictions on outflows. After all, the
favourable growth and interest rate differential in
emerging markets against developed countries imply less
incentive for Thai residents to invest or lend abroad.
Furthermore, the quantum of investible savings or wealth
in developed countries would be larger than in developing
countries. This is why it would be difficult for the central
bank to avoid some form of control or tax on capital
inflows. This could take the form of unremunerated
reserve requirement or tobin tax, but we continue to
emphasize that the authority will be extremely careful not
to close the tap completely or send the wrong signal to
foreign investors (like in Dec 2006).
We maintain Thai GDP forecast for 2010 at 9%. The
stronger-than-expected 2Q10 growth points to 9% full-year
growth, which is far higher than consensus expectation of
7.0%. Growth will be driven by both domestic demand and
exports. In 2011, we expect the economy to normalize at
4.0% growth. And from 2011 onwards, there is a good
chance that private investment will accelerate (relative to
2006-08) despite political uncertainties. This is simply
because investments have not seen a cyclical upswing since
2005, when political uncertainties peaked.
We expect 2010 inflation at 3.0%. Inflation is unlikely to be
a major concern in this part of the cycle, but a low base and
removal of subsidies are bound to keep prices firm in 2010
and 2011, and inflation is likely to rise to 3.0% in 2010 and
2.8% in 2011. Therefore, timely rate normalization is
critical.
Expect two more 25bps rate hikes in 4Q10. The central bank
also commented on the appropriate level of interest rates,
noting that real interest rates were still negative and that
rates still needed to normalize. This affirms our (aboveconsensus)
expectation for two more 25bps rate hikes in
4Q10. Note that the Monetary Policy Committee (MPC) will
have two more meetings this year to decide on policy rates
on 20 Oct and 1 Dec 2010. By mid-2011, we expect rates
to have risen to 3.00% from 1.75% currently.
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Malaysia (Neutral) (Wong Ming Tek and Malaysia Team, mingtek@hwangdbsvickers.com.my)
Near term outlook
We foresee positive domestic factors for Malaysia such as
the country's transformation program, push to improve
public transportation in the 10th Malaysian Plan,
redevelopment of government land and measures to
improve the market's investability.
We raised our year-end KLCI target to 1,520. For 2011, our
year-end target is 1,650, based on 14x forward earnings.
target the KLCI to reach 1,500 points (14x 2011 earnings)
by end-2010.
Private sector friendly
PM Datuk Seri Najib Tun Razak announced budget for 2011
on 13 October. Budget 2011 emphasized measures to
encourage private sector to drive growth. The PM
reaffirmed commitment to the RM40bn high impact MRT
project that will start in 2011. We believe its successful
completion will be instrumental in transforming Malaysia to
a high income nation.
The federal government has targeted to bring the fiscal
deficit down to below 3% by 2015. And reducing the
budget deficit by just 0.2%-pt this time round could either
suggest more aggressive consolidation going forward or a
lack of motivation in its fiscal target. Not withstanding the
toll of its costly subsidy programme, there is a strong need
for alternative revenue source as the sustainability of the
fiscal position has been over-reliant on direct taxes and the
oil revenue. Dividend payouts from Petronas account for
about 35% of the country’s direct tax revenue in 2009
Fig. 21: Malaysia GDP per capita
'000 MYR
40
35
30
25
20
15
There was no increase in property tax or measure to reduce
loan-to-value ratio. Positively, there were incentives to
promote home ownership. There was also no additional tax
on gaming companies or brewers. The government had
recently postponed the implementation of the Goods &
Services Tax (GST). There will be no toll rate increases for
PLUS projects over next 5 years. These signals could fuel
expectations of an early election.
Other than the RM40bn Mass Rapid Transit (MRT) project
which will be implemented in 2011, there were also several
initiatives for public-private partnerships including six new
highway projects including the West Coast Highway. Other
mega projects also include RM26bn financial district to start
in 2011, PNB's RM5bn 100-storey tower.
More fiscal consolidation needed
The federal government has managed to meet its original
fiscal deficit target of 5.6% of nominal GDP in FY 2010 as
higher than expected expenditure was met with strong
revenue collection due to robust economic growth and
stable oil prices. And for 2011, the official fiscal deficit
target has been lowered to 5.4% although we think that an
anticipated rise in oil prices going forward could bring about
higher oil revenue and deliver a lower final deficit of 5.2%
of GDP.
10
5
0
91 93 95 97 99 01 03 05 07 09 11 13 15
Source: Datastream, DBS
Drivers:
In our view, the approach and ideas/initiatives of the
program inspire optimism. If implemented successfully, these
programs could help fundamentally transform the country
and attract major investments to stimulate growth.
10MP boost. The 10th Malaysia Plan (10MP) outlines the
macroeconomic framework and strategies for 2011-2015.
The government intends to facilitate greater private sector
participation to drive economic growth over the next 5
years. Several contracts have since been awarded where
contractors are also responsible for financing - easing the
pressure on government's finances.
The plan increased its emphasis on improving public
transportation systems with projects such as LRT extensions
and MRT. In our view, the construction sector has more
upside with the award of these projects. The MRT could
double Gamuda's order book and triple MMC's.
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We understand there has been a pick-up in the number of
construction and infrastructure tenders. Although
competition remains keen, we see more positive project
news flow for the sector in the coming months.
Government land sales. Apart from the construction and
infrastructure projects, we are optimistic over the valueenhancement
opportunities from the redevelopment of
strategic government land. We expect MRCB's appointment
as master developer of the Rubber Research Institute
Malaysia (RRIM) land to be a key catalyst for the stock.
Government linked companies (GLCs) and players with
strong balance sheets could be winners for such projects.
Resilient domestic demand. Following the strong 2Q10 GDP
growth of 8.9% YoY, we expect 2H10 growth to moderate
- due to the erosion of the low base coupled with a general
slowdown in global growth momentum. Despite the
projected moderation in 2H10, full year growth is expected
to be a solid 8% and healthy 5.5% in 2011, on the back of
resilient domestic demand. The resilient domestic demand
bodes well for banks, as positive sentiment would drive
demand for consumer and business loans. Other
beneficiaries are Tenaga and aviation-related plays such as
AirAsia and Malaysia Airports. We also believe it could boost
demand for big-ticket items (such as property; our sector
picks: SP Setia, E&O, Bolton).
Improve investability. We expect further divestments in
government linked company (GLC) stakes, privatizations and
M&A to increase free float, liquidity and valuations. This
together should help attract foreign interests - which remain
at relatively low levels (c.21%).
Risks:
Delays in execution of the transformation program or rollout
of infrastructure projects. There will definitely be major
challenges and resistance. Implementation is a key test for
the government and economic transformation.
Fig. 25: Singapore and Hong Kong listed ETFs exposed to Thailand / Indonesia / Malaysia / Vietnam markets
ETF Ticker Mkt Cap Style Exchange Underlying Ccy Bid NAV/ Premium/ Avg Daily Avg Daily
(US$ m) Index Price INAV Discount Volume Value (US$m)
Tracker 15-Oct (latest) (20 day) (20 day)
ETFs exposed to Malaysia
Lyxor Malaysia MAL SP Equity 31 Country Fund Malaysia MXMY U$ 9.04 8.96 0.4% 108,764 0.946
DBXT MSCI Malaysia LG6 SP Equity 4 Country Fund Malaysia NDDUMAF S$ 12.32 12.32 -0.4% 3,905 0.047
FTSE Bursa Malaysia KLCI FBM30 MK Equit 1.6 Growth Malaysia FBMKLCI M$ 1.49 1.50 -0.4% 630.6 0.3
MYETF DJ Islamic Titans 2DJIM25 MK Equit 202.5 Sector Funds Malaysia DJMY25 M$ 0.92 0.91 0.9% 3,610.4 1.0
ETFs exposed to Indonesia
DBXT MSCI Indonesia XMIN SP Equity 96 Country Fund Indonesia NDEUINF U$ 14.60 14.41 0.8% 202,166 2.900
ETFs exposed to Thailand
DBXT MSCI Thailand LG7 SP Equity 25 Country Fund Thailand NDEUTHF U$ 15.86 15.84 -0.2% 28,493 0.429
ThaiDEX SET50 ETF TDEX TB Equity 80.0 Country Fund Thailand SET50 TB 6.93 6.93 0.1% 1,801.3 0.402
ThaiDEX FTSE SET Large CTFTSE TB Equity 4.0 Country Fund Thailand FSTHL TB 11.93 11.96 0.1% 1.9 0.001
Mtrack Energy ETF ENGY TB Equity 7.9 Group Funds Thailand N/A TB 5.04 4.98 1.2% 160.3 0.026
ETFs exposed to Vietnam
DBXT FTSE Vietnam XFVT SP Equity 248 Country Fund Vietnam FVTTE U$ 37.37 36.64 2.0% 30,746 1.128
DBXT FTSE Vietnam 3087 HK Equity 248 Country Fund Vietnam FVTTE K$ 289.80 284.55 2.0% 30 1.124
Source: Bloomberg. Notes: HK-listed ETFs - Vol in ‘000s, Price and NAV are in HKD unless otherwise stated. SG-listed ETFs – Actual vol traded, Price
and NAV are in US$ unless otherwise indicated.
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Disclaimer:
The information herein is published by DBS Bank Ltd (the “Company”). It is based on information obtained from sources
believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy,
completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice.
Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the
particular needs of any specific addressee. The information herein is published for the information of addressees only and is
not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial
advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any
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the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further
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information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options
or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors,
officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein
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country where such distribution or use would be contrary to law or regulation.
Licence No.: MICA (P) 073/11/2009
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