ETFs: An Alternative Investment Tool Investors Knowledge @ Bursa Malaysia 25 th June 2011
Contents Section 1 What is an ETF? Section 2 ETFs in the Global Market Section 3 CIMB FTSE CHINA 25 ETF Section 4 CIMB FTSE ASEAN 40 ETF Disclaimer 2
SECTION 1 What is an ETF?
What is an Exchange Traded Fund? ETF is Open-ended investment fund listed and traded on a stock exchange Combines the features of an Index fund + that of a stock Access to a broad Index: market, sector and asset classes Independent rules-based index design provides the market with transparency Diversification Source: FTSE 4
What is an Exchange Traded Fund? Objective: To track the performance of the Index not to outperform Price of ETF will closely track the price of the underlying Index Benefits to Investors: Low cost - exposure to a broad Index at a fraction of the cost Convenient and easy access to regional & international economies & markets Buy and sell ETF units on the Exchange, normal transaction costs apply Investor interest protected as underlying shares are held by custodian Construct a diversified portfolio made of ETFs Useful for both short and long term investment planning 5
Factors Determining ETF Investing Market Risks Economic consideration of the underlying Index Liquidity Reflects the liquidity of the underlying basket of shares Eg: The liquidity of the CIMB FTSE ASEAN 40 ETF is the liquidity of the 40 stocks in the FTSE/ASEAN 40 Index Presence of Market Makers /Participating Dealers to ensure continuous pricing At least 80% in the market Creation/redemption mechanism Tracking error Passively managed Acceptable range - 0.5% 6
SECTION 2 ETFs in the Global Market
ETFs: Global Industry Review At the end of May 2011, the global ETF industry had 2,747 ETFs with assets of USD1.45 trillion. YTD, the number of ETFs have increased by 2.9% with 76 new ETFs launched. There are currently plans to launch 1,022 new ETFs. Blackrock estimated that global AUM of ETFs to increase by 20-30% annually over the next 3 years taking the global ETF industry to approximately USD2.0 trillion by the end of 2012. Globally, net sales of mutual funds (excluding ETFS) were USD4.5 bn, while net sales of ETFs were +USD38.4 bn. Statistics from Blackrock as of May 2011 8
Global ETF and ETP asset growth Statistics from Blackrock as of May 2011 9
Asia-Pac ex Japan Growth Asia-Pac ex Japan May-11 May-10 % Change No of ETFs 259 177 46.3% Assets Under Management USD 59bn USD47.8bn 23.4% Issuers/Managers 65 60 8.3% Exchanges 30 30 Statistics from Blackrock as of May 2011 10
ETFs on Asean Stock Exchanges Singapore has over 80 ETF listings. Most of listings are cross-listings by Blackrock (formerly Barclays Global Investors), DBS and Lyxor. The range of ETFs include country centric, regional, sector, commodity, money market and bond ETFs. The primary listings are mainly by the regional houses which includes CIMB-Principal, DBS and UOB Asset Management. This would include the CIMB FTSE ASEAN 40 ETF, DBS STI ETF and United SSE 50 China ETF. Malaysia has 5 ETFs listed on Bursa Malaysia; ABF Malaysia Bond Index Fund, FTSE Bursa Malaysia KLCI ETF, MyETF Dow Jones Islamic Market Malaysia Titan 25, CIMB FTSE ASEAN 40 and CIMB FTSE China 25. Plans are underway by Bursa and SC to encourage more ETF listings on Bursa. Thailand has 4 ETFs listed on SET; ThaiDEX SET50 ETF, MTrack Energy ETF, ThaiDEX FTSE SET Large Cap ETF and W.I.S.E KTAM CSI 300 China Tracker ETF. The Thai Stock Exchange is working with the Thai SEC to allow foreign issuers to cross-list ETFs on SET. Indonesia has only one ETF; ETF LQ 45 that tracks the Indonesian stocks. The capital controls in place is a major impediment for ETF cross-listings on JSE. 11
SECTION 3 CIMB FTSE CHINA 25 ETF
FTSE China 25 Index The FTSE China 25 Index (formerly FTSE Xinhua China 25 Index) comprises of 25 of the largest and most liquid Chinese stocks (Red Chips & H shares) listed and traded on the HKSE The Index is specifically designed for international investors H shares Securities of companies incorporated in the People s Republic of China and Listed on the HKSE. Red Chips Red chip companies are incorporated outside of the People s Republic of China that trade on the HKSE. A Red Chip is a company that is substantially owned directly or indirectly by mainland China entities, and has the majority of their sales revenue or operating assets derived from mainland China. Individual constituents weights are capped at 10% to avoid over concentration in any one stock. The Index is FTSE constructed. Stocks are free float adjusted and liquidity screened to ensure that they are tradable. Source: FTSE China 25 Index Ground Rules 13
FTSE China 25 Top 10 Constituents Top 10 Constituents China Construction Bank Corp 9.83% China Mobile Ltd 9.03% Industrial and Commercial Bank of China 7.71% CNOOC Ltd 7.43% Bank of China 5.80% China Unicom Hong Kong Ltd 5.06% Ping An Insurance Group Co 4.15% China Telecom Corp Ltd 4.14% China Shenhua Energy Co Ltd 4.13% PetroChina Co Ltd 4.08% Source: Bloomberg 14
FTSE China 25 Sector Breakdown Sector Breakdown Financials 51% Telecommunications 18% Oil & Gas 15% Basic Materials 13% Industrials 2% Consumer Services 2% Source: Bloomberg 15
FTSE China 25: The Constituents Agricultural Bank Of China Air China Ltd Aluminum Corp of China Ltd Bank of China Ltd Bank of Communications Co Ltd China Citic Bank Corp Ltd China Coal Energy Co China Construction Bank Corp China COSCO Holdings Co Ltd China Life Insurance Co Ltd China Merchants Bank Co Ltd China Minsheng Banking China Mobile Ltd (R) China Pacific Insurance (Group) Co Ltd China Petroleum & Chemical Corp China Railway Group Ltd China Shenhua Energy Co Ltd China Telecom Corp Ltd China Unicom Hong Kong Ltd (R) CNOOC Ltd (R) Industrial & Commercial Bank of China PetroChina Co Ltd Ping An Insurance Group Co of China Ltd Yanzhou Coal Mining Zijin Mining Group Co Ltd Source: FTSE; 31 May 2011 16
CIMB FTSE China 25 ETF The CIMB FTSE China 25 (formerly CIMB FTSE Xinhua China 25) tracks the FTSE China 25 Index Listed on Bursa Malaysia on 9 July 2010 Income distributions (if any) are expected to be paid annually subject to the discretion of the Manager. AUM of RM20.51 million as of end May 2011 Average daily trading volume : 140,000 units as of end Mar 2011 Why Invest in the Fund? Opportunity to participate in China s blue-chip companies Ease of trading: no hassle of cross-border trading Affordable: each unit gives exposure to 25 blue chip stocks in China. Saves time & money Convenient : RM denominated for ease of settlement Source: CIMB-Principal Asset Management Berhad, May 2011 17
SECTION 3 CIMB FTSE ASEAN 40 ETF
Why ASEAN? Gaining attention as it complements China & India in the long term growth story of Asia. Average GDP growth of between 6-15% for 2010. Rich in natural resources e.g. oil & gas, tin, nickel etc. Globally competitive in soft commodities. The region supplies 85% of the global needs of palm oil and more than 70% of global needs for rubber. Rapidly urbanizing: Domestic demand is expected to grow with young workforce, growing middle class and increased FDI & infrastructure spending. The market is increasingly liquid. The combined market capitalization of the five Southeast Asian markets is now US$1.8 trillion. ASEAN 5 Region of Stable & Promising Growth Singapore The region s financial hub Malaysia One of the largest palm oil exporter Thailand World s largest rice exporter Indonesia Rich in natural resources Philippines Country with strong workforce 19
FTSE/ASEAN 40 Index The FTSE/ASEAN 40 Index was launched on 21 Sept 05. It a tradable index comprising top 40 stocks in the ASEAN-5; Singapore, Malaysia, Thailand, Indonesia and the Philippines It was an ASEAN-5 government initiative to position ASEAN as an asset class The Index is ranked by market capitalisation and free float adjusted. Each constituent must pass a liquidity test to qualify. Each security must turn over at least 20% of its shares in issue, after adjusting for free float, in the 12 months prior to review to ensure the Index is tradable. Source: FTSE 20
CIMB FTSE ASEAN 40 ETF - A Cost Effective Gateway To The ASEAN Growth Story The CIMB FTSE ASEAN 40 Singapore is designed to track the FTSE/ASEAN 40 Index Listed on SGX on 21 Sept 2006 Provides immediate exposure to the top 40 stocks in the ASEAN -5 region Highly correlated to ASEAN 5 markets Avoid fragmented regulations & market conditions in 5 countries Current PDs/Market Makers Citigroup Flow Traders Societe Generale DBS Vickers (PD only) Goldman Sachs (PD Only) Source: CIMB-Principal Asset Management (S) Pte Ltd, May 2011 21
CIMB FTSE ASEAN 40 ETF - Fund Breakdown Top 10 Holdings DBS Group Holdings 5.70% Singapore Telecom 5.40% Astra International 5.30% Oversea-Chinese Banking 5.30% United Overseas Bank 4.90% Malayan Banking 4.40% Public Bank Fgn 4.20% CIMB Group Holdings 4.20% Sime Darby Bhd 3.70% Keppel Corp 3.50% Source: CIMB-Principal Asset Management (S) Pte Ltd, May 2011 22
CIMB FTSE ASEAN 40 ETF - Fund Breakdown Country Breakdown Singapore 41% Malaysia 30% Indonesia 18% Thailand 11% Phillipines 1% Source: Bloomberg, May 2011 23
CIMB FTSE ASEAN 40 ETF - Fund Breakdown Sector Breakdown Financials 45% Telcos 14% Consumer Goods 12% Industrials 9% Consumer Services 9% Oil & Gas 9% Utilities 2% Source: Bloomberg, May 2011 24
CIMB FTSE ASEAN 40 ETF - The Constituents Singapore (13 stocks) Capitaland City Developments DBS Group Holdings Genting Singapore Jardine Cycle & Carriage Keppel Corp Noble Group Overseas Chinese Banking Singapore Airlines Singapore Technologies Engineering Singapore Telecom United Overseas Bank Wilmar International Limited Malaysia (12 stocks) Axiata CIMB Group Holdings Genting IOI Malayan Banking Maxis Petronas Chemical Petronas Gas Plus Expressways Public Bank (F) Sime Darby Tenaga Nasional Phillipines (1 Stock) Phil Long Dist Tel Indonesia (7 stocks) Astra International Bank Central Asia Bank Mandiri Bank Rakyat Indonesia Perusahaan Gas Negara Telekomunikasi Indonesia Unilever Indonesia Thailand (7 stocks) Advanced Info Serv Bangkok Bank Kasikornbank PTT PTT Exploration & Production Siam Cement Siam Commercial Bank PCL Source: CIMB-Principal Asset Management (S) Pte Ltd, May 2011 25
CIMB FTSE ASEAN 40 Malaysia ETF Listed on Bursa Malaysia on 9 July 2010 The Fund feeds into the CIMB FTSE ASEAN 40 ETF in Singapore which tracks the FTSE/ASEAN 40 Index RM denominated for ease of settlement AUM of RM12.61 million as of end May 2011 Average daily trading volume: 52,000 units as of end May 2011 Source: CIMB-Principal Asset Management Berhad, May 2011 26
CIMB FTSE ASEAN 40 ETF (SGX) Fund Performance Total Return (as of 31 May 2011) YTD (%) 1 Yr (%) 3 Yr (%) Since Inception (21/9/06) (%) CIMB FTSE ASEAN 40 ETF (NAV) 6.05 33.09 34.56 85.85 CIMB FTSE ASEAN 40 ETF (Index) 5.52 31.09 25.02 71.87 Annualised Total Return YTD (%) 1 Yr (%) 3 Yr (%) Since Inception (21/9/06) (%) CIMB FTSE ASEAN 40 ETF (NAV) NA NA 10.40 14.12 CIMB FTSE ASEAN 40 ETF (Index) NA NA 7.73 12.23 Returns are calculated on NAV-to-NAV basis in USD on the assumption that all distributions made by the Fund are reinvested Source: CIMB-Principal Asset Management (S) Pte Ltd, May 2011 27
Summary - Key Data CIMB FTSE ASEAN 40 Malaysia CIMB FTSE China 25 Listing Date 9 July 2010 9 July 2010 Exchange Listing Bursa Malaysia Bursa Malaysia Trading Currency MYR MYR AUM as at 31.05.2011 RM12.61 million RM20.51 million NAV per unit as at 31.05.2011 RM1.56 RM1.05 Average volume traded daily 52,000 units 120,000 units ISIN Code MYL0822EA006 MYL0823EA004 Reuters Code CIAM.KL CIFC.KL Bloomberg Fund Code CIMBA40 MK <Equity> CIMBC25 MK <Equity> Bloomberg Index Code ASEAN 40 <Index> XIN0I <Index> Source: Bloomberg, 31 May 2011 28
For more information about our ETFs, visit www.cimbetf.com Thank You 29
Disclaimer The Manager of the CIMB FTSE ASEAN 40 ( Fund ) is CIMB-Principal Asset Management (S) Pte. Ltd. (Company Registration Number 200607208K). Copies of the prospectus are available from the Manager or at www.cimbetf.com. Investors should read the prospectus before deciding to purchase any units in the Fund ( Units ). The listing of the Units does not guarantee a liquid market for the Units. The value of the Units and the income derived from them, if any, may fall as well as rise. Past performances of the Fund, the Manager, BlackRock Asset Management North Asia Limited ( Investment Adviser ) or the FTSE/ASEAN 40 Index ( Index ) are not necessarily indicative of their future performance. The information contained herein is for your general information only and does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You may wish to seek advice from a financial adviser before making a commitment to purchase Units. If you choose not to seek advice from a financial adviser, you should consider whether the Fund is suitable for you. Although the information contained herein has been taken from sources that are believed to be accurate, no warranty or representation is made as to its correctness, completeness or accuracy. The Manager and Investment Adviser accept no liability whatsoever for any direct, indirect or consequential loss arising from any use or reliance of the information herein. 30
Disclaimer We recommend that you read and understand the contents of the CIMB FTSE ASEAN 40 Malaysia Prospectus dated 9 June 2010, and the CIMB FTSE China 25 (formerly known as CIMB FTSE Xinhua China 25) Prospectus dated 9 June 2010 and Supplemental Prospectus for CIMB FTSE China 25 dated 16 December 2010 that have been duly registered with the Securities Commission, before investing and that you keep the said prospectuses for your records. Investments in the CIMB FTSE ASEAN 40 Malaysia are exposed to the following risks, which include returns not guaranteed, general market risk, inflation risk, loan financing risk, risk of non-compliance, Manager s risk, market risk, passive investment, tracking error risk, creation and redemption through participating dealer only, no prior trading market in the units, minimum creation and redemption size, units may trade at price other than at net asset value of the Fund, lack of operational history, income distributions are contingent on dividend paid by the CIMB FTSE ASEAN 40 ( SF ), concentration on the SF, concentration on a particular group of stocks, industry or group of industries, dependence on trading market for the FTSE/ASEAN 40 Index ( Underlying Index ) securities, lack of discretion by Manager to adapt to market changes, trading in units on Bursa Malaysia Securities Berhad ( Bursa Securities ) may be suspended, trading in SF units on the Singapore Exchange Securities Trading Limited may be suspended, units may be de-listed from Bursa Securities, suspension of creations and redemptions, right of the Monetary Authority of Singapore to withdraw authorization of the SF, counterparty risk of the SF, risk relating to the Index Return ASEAN Access Products of the SF, emerging market risk, foreign exchange risk, foreign security risk, market disruption events and settlement disruption events, errors or inaccuracies in the Underlying Index, fluctuations in the Underlying Index, changes in the composition of and weightings in the Underlying Index, termination of licence to use the Underlying Index, and compilation of the Underlying Index. Investors may obtain units by purchasing or selling units in the secondary market on Bursa Securities after listing, or applying for creation and redemption through participating dealer. You can obtain copies of the prospectus from the head office of CIMB-Principal Asset Management Berhad or our participating dealer. Investments in the CIMB FTSE China 25 are exposed to the following risks, which include returns not guaranteed, general market risk, inflation risk, loan financing risk, risk of non-compliance, Manager s risk, market risk, passive investment, tracking error risk, creation and redemption through participating dealer only, no prior trading market in the units, minimum creation and redemption size, units may trade at prices other than at net asset value of the Fund, lack of operational history, income distributions are contingent on dividends paid on authorised securities, concentration on a particular group of stocks, industry or group of industries, dependence on trading market for index securities, lack of discretion by Manager to adapt to market changes, trading in units on Bursa Securities may be suspended, units may be de-listed from Bursa Securities, risks of investing in financial derivatives, registration or cross-listing of Fund in other markets, suspension of creations and redemptions, timing between pricing, issue and trading, foreign security risk, foreign exchange risk, market disruption events and settlement disruption events, errors or inaccuracies in the FTSE China 25 Index ( Benchmark Index ), fluctuations in the Benchmark Index, changes in the composition of and weightings in the Benchmark Index, termination of licence to use the Benchmark Index and compilation of the Benchmark Index. You can obtain copies of the prospectuses from the head office of CIMB-Principal Asset Management Berhad or from any of our participant dealer, placement agent or selling agent. These Exchange-Traded Funds are managed by CIMB-Principal Asset Management Berhad. No representation or warranty is made nor is there acceptance of any responsibility or liability as to its accuracy, completeness or correctness. There are fees and charges involved when investing in the Funds. We suggest that you consider these fees and charges carefully prior to making an investment. Unit prices and income distributions, if any, may fall or rise. Past performance is not reflective of future performance and income distributions are not guaranteed. 31
FTSE Disclaimer FTSE, "FT-SE ", are trademarks jointly owned by the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE International Limited ( FTSE ) under licence. The FTSE China 25 Index is calculated by FTSE. FTSE does not sponsor, endorse or promote the CIMB FTSE China 25 ( Fund ) and is not in any way connected to it and does not accept any liability in relation to its issue, operation and trading. All copyright and database rights in the index values and constituent list vest in FTSE. The Manager has obtained full licence from FTSE to use such copyrights and database rights in the creation of this product. The FTSE/ASEAN 40 is not in any way sponsored, endorsed, sold or promoted by FTSE International Limited ( FTSE ), the London Stock Exchange Plc ( LSE ) or by the Financial Times Limited ( FT ) and neither FTSE nor LSE nor FT makes any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE/ASEAN 40 Index ( the Index ) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is complied and calculated by FTSE in conjunction with PT Bursa Efek Jakarta (Jakarta Stock Exchange), Bursa Malaysia Berhad, The Philippine Stock Exchange, Inc., Singapore Exchange Securities Trading Limited and The Stock Exchange of Thailand ( the Exchanges ). However, neither FTSE nor LSE nor the Exchanges nor FT shall be liable (whether in negligence or otherwise) to any person for any error in the Index and neither FTSE nor LSE nor the Exchanges nor FT shall be under any obligation to advise any person of any error therein. 32