First active exchange-traded fund set to list on SGX on Jan 31

Using AI

A notable feature of the Lion-Nomura Japan Active ETF will be its use of AI.

Mr Geoff Howie, the SGX’s equities market strategist, noted that AI is becoming more popular in the financial sector, especially in Singapore and Japan. For example, AI-related stocks were the main reason the S&P 500 index on Wall Street recouped its 2022 losses in 2023.

Mr Howie added that “AI can automate and augment tasks such as data collection, analysis, natural language processing, sentiment analysis, anomaly detection and risk assessment”.

Ms Ong Ai Ling, Lion Global Investors’ portfolio manager and head of Artificial Intelligence of Investments, said that “by using artificial intelligence to make the stock selection, you avoid the human bias and emotions in the decision-making process, hence ensuring that you have a disciplined approach towards investing”. 

The Japan theme

The theme of Japan is likely to resonate with investors, the various players added.

Lion Global’s Mr Teo said that corporate governance reforms and strong foreign investor interest is expected to continue to drive the Japanese stock market

Economic policies laid out by the late Prime Minister Shinzo Abe included governance reforms and restructuring changes at the Tokyo Stock Exchange (TSE), said Lion Global’s Ms Ong.

The exchange restructured its market segments into prime, standard and growth segments. To stay in the prime segment, companies that are trading at below one times price to book (price per share must be equal to book value per share) must “comply or explain” why they are trading at below book value.

To avoid being downgraded, companies will undertake share buybacks or issue dividends to raise their stock price. Other companies have started unwinding their cross shareholdings as well as redeploying capital in an effort to improve their return on equity, added Ms Ong.

Japan is also experiencing inflation, which is a positive after many years of deflation. A moderate level of inflation means corporate profit margins can start to improve, and this in turn will improve corporate valuations. 

Investor safeguards and how to apply for the ETF

The SGX issued a practice note in December 2023 focusing on investor safeguards. These include fund managers having to publish indicative net asset values throughout the trading day, disclose net asset value daily and to publish fund performance and portfolio holdings on a monthly basis. 

The initial offering period (IOP) of the Lion-Nomura Japan Active ETF is from Jan 5 to Jan 25 with listing starting on Jan 31. The ETF is available in both Singapore and US dollar denominations under the SGX code JJJ and JUS respectively. The issue price of each unit during the IOP is $1.

Investors can subscribe to the ETF through OCBC ATMs, internet banking or mobile banking during the IOP period. Participating dealers include iFAST Financial, Moomoo Financial Singapore, OCBC Securities, Phillip Securities and Tiger Brokers (Singapore).

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