Strategy
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Singapore Bonds

Seeks to generate returns by investing in Singapore dollar denominated fixed income securities issued by Singapore Government, statutory boards, and corporates.
Investment Philosophy

The Singapore Bonds strategy is a key strategy managed by our Asian Fixed Income team at Nikko AM. It seeks to generate returns by investing in Singapore dollar denominated fixed income securities issued by Singapore Government, statutory boards, and corporates. This includes non-rated debt securities issued by Singapore-incorporated entities and Singapore statutory boards. Driven by a proprietary Fundamental Valuation Technical (FVT) Credit Strategy Framework that utilises an Internal Credit Rating (ICR) system, it aims to bring together a high conviction portfolio of the investment team’s best ideas in Singapore bonds.

Our investment process seeks to deliver returns through multiple sources of alpha, utilising both top-down and bottom-up strategies. The research approach utilises our proprietary Fundamental, Valuation and Technical (FVT) framework to distil the top-down and bottom-up perspectives from a multitude of macro-economic factors and issuer- and issue-specific characteristics, to add value within the defined levels of risks and constraints, using both qualitative and quantitative techniques. Most important in our fundamental analysis is our Internal Credit Rating (ICR) model, which has been time and stress tested for its robustness since inception in 2006. Our ICR assesses quantitative and qualitative aspects of each issuer independently of external credit rating agencies. Environmental, Social and Governance (ESG) factors also form an important aspect of the credit analysis. Our proprietary Internal Credit Rating (ICR) model, conceptualised and developed by our Asia Credit team, is the first pillar in our credit research process.

The investment philosophy and strategy of the Asian Fixed Income team is well-tested over time and remains stable. For more details on our investment philosophy, Research and ESG framework and investment team, please visit the Asian Fixed Income Strategy page.

Singapore – a Little Red Dot

Singapore is recognised globally as being one of the strongest economies, built on a foundation of political stability, robust monetary and fiscal policies and a sound judicial system1. Singapore is one of few countries in the world with a AAA ranking from the 3 major ratings agencies (based on Fitch, Moody's and S&P Rating, 31 March 2022)2.

Singapore Bonds Provides Diversification

Even during periods of market uncertainty, Singapore government bonds enjoy a safe haven status. Over the years, the Singapore dollar fixed income market has seen steady growth. The market comprises active issuances from issuers that include the Singapore government (bills and bonds), statutory boards and local and foreign corporates. The market stood at SGD 625 billion3, as of end-March 2022. The Singapore Dollar Fixed Income market offers investors a range of instruments with different risk-return profiles, ranging from government to quasi-sovereign to corporate bonds.

Nikko AM’s Vast Experience in Managing Asian Bonds

With a diverse and growing investment universe in Asian bonds, our highly experienced Fixed Income team manages a wide range of active Asian fixed income portfolios. They are present on the ground and understand the idiosyncratic risks of individual countries, sectors and issuers within Asia. An Asia-focused manager is able to provide alpha both from a top-down and bottom-up perspective given their specialisation and a deep understanding of the local markets and the underlying issuers. This enhances their ability to generate investment ideas.

Under the Singapore Fixed Income spectrum managed by our team, other than the actively managed strategies, we also have available passive strategies such as exchange traded funds (ETFs) like the ABF Singapore Bond Index Fund and the Nikko AM SGD Investment Grade Corporate Bond ETF. We launched Singapore’s first bond ETF that covers the Singapore fixed income market in 2005 with the ABF Singapore Bond Index Fund. In 2018, we launched the Nikko AM SGD Investment Grade Corporate Bond, the first investment grade local currency corporate bond ETF in Singapore.

1 Source: https://www.edb.gov.sg/en/why-singapore/an-economic-powerhouse.html
2 Source: Bloomberg, Nikko AM Asia, 31 March 2022
3 Source: ADB AsianBondsOnline, March 2022. Includes bonds and short-term bills.

Important Information

The funds mentioned are Singapore registered funds approved for sale or purchase in Singapore. By proceeding, you are representing and warranting that you are either resident in Singapore or the applicable laws and regulations of your jurisdiction allow you to access the information.

This document is purely for informational purposes only with no consideration given to the specific investment objective, financial situation and particular needs of any specific person. It should not be relied upon as financial advice. Any securities mentioned herein are for illustration purposes only and should not be construed as a recommendation for investment. You should seek advice from a financial adviser before making any investment. In the event that you choose not to do so, you should consider whether the investment selected is suitable for you. Investments in funds are not deposits in, obligations of, or guaranteed or insured by Nikko Asset Management Asia Limited (“Nikko AM Asia”).

Past performance or any prediction, projection or forecast is not indicative of future performance. The Fund or any underlying fund may use or invest in financial derivative instruments. The value of units and income from them may fall or rise. Investments in the Fund are subject to investment risks, including the possible loss of principal amount invested. You should read the relevant prospectus (including the risk warnings) and product highlights sheet of the Fund, which are available and may be obtained from appointed distributors of Nikko AM Asia or our website (www.nikkoam.com.sg) before deciding whether to invest in the Fund.

The information contained herein may not be copied, reproduced or redistributed without the express consent of Nikko AM Asia. While reasonable care has been taken to ensure the accuracy of the information as at the date of publication, Nikko AM Asia does not give any warranty or representation, either express or implied, and expressly disclaims liability for any errors or omissions. Information may be subject to change without notice. Nikko AM Asia accepts no liability for any loss, indirect or consequential damages, arising from any use of or reliance on this document. This advertisement has not been reviewed by the Monetary Authority of Singapore.

The performance of the ETF’s price on the Singapore Exchange Securities Trading Limited (“SGX-ST”) may be different from the net asset value per unit of the ETF. The ETF may also be delisted from the SGX-ST. Transaction in units of the ETF will result in brokerage commissions. Listing of the units does not guarantee a liquid market for the units. Units of the ETF may be bought or sold throughout trading hours of the SGX-ST through any brokerage account. Investors should note that the ETF differs from a typical unit trust and units may only be created or redeemed directly by a participating dealer in large creation or redemption units. Investors may only redeem the units with Nikko AM Asia under certain specified conditions.

The Central Provident Fund (“CPF”) Ordinary Account (“OA”) interest rate is the legislated minimum 2.5% per annum, or the 3-month average of major local banks' interest rates, whichever is higher, reviewed quarterly. The interest rate for Special Account (“SA”) is currently 4% per annum or the 12-month average yield of 10-year Singapore Government Securities plus 1%, whichever is higher, reviewed quarterly. Only monies in excess of $20,000 in OA and $40,000 in SA can be invested under the CPF Investment Scheme (“CPFIS”). Please refer to the website of the CPF Board for further information. Investors should note that the applicable interest rates for the CPF accounts and the terms of CPFIS may be varied by the CPF Board from time to time.

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Markit has no obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate.

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