Deutsche Bank db x-trackers has listed on SGX the world’s first Australia Money Market ETF linked to the overnight AUD cash rate based on the DB Australia Overnight Money Market Total Return Index. The Index is published by Deutsche Bank AG, acting through its London Branch, in AUD and had a base value of 100 on 1 July 1998.

The Index reflects the daily rolled deposit earning the Interbank Overnight Cash Rate (“IOCR”), which is the short-term money market reference rate for transactions denominated in AUD in Australia published daily by the Reserve Bank of Australia (the “RBA”). The IOCR is the interbank overnight weighted average rate at which trades are arranged between market participants and reflects the actual AUD overnight funding rates transacted by market participants.

The money market rate published by the Reserve Bank of Australia (RBA) is currently at 4.25%.

The performance of the ETF, based on the historical return of the index minus fees, would have ranked in the top 10% of Australian cash funds in the last 5 years (source: Morningstar)

The Australia Money Market ETF can be traded in AUD, SGD, or USD and has an annual all in fee of just 0.20%.

Note that whichever currency ETF you buy, you will still maintain an exposure to the Australian dollar as that is the currency of the underlying asset. Of course, if your funding source is in SGD, buying the SGD version would make sense as it will reduce your currency conversion cost (assuming you trade often).

db x-trackers, Deutsche Bank’s Exchange Traded Funds business, has recently launched Asia’s first money market ETF, with the listing of the US Dollar Money Market ETF in both Singapore and Hong Kong.

The DB x-trackers US Dollar Money Market ETF tracks the Fed Funds Effective Rate Total Return Index, which reflects a daily rolled deposit earning Fed Funds effective rate.

The ETF benefits from a credit rating of Aaa and a market risk rating of MR1 assigned by Moody’s Investors Service.

The minimum bid size of this ETF is US$0.01 and will be quoted in board lots of 5 units. The ETF charges a low all-in annual fee of up to 0.15%.

With USD money market ETFs giving an average annualised returns of around 3% over the long term, most of the retail investors here who invest in the stock market would probably not be interested in this ETF.

A presentation of this ETF can be downloaded here:

DB x-trackers US Dollar Money Market ETF

Deutsche Bank has just launched some exchange traded funds (ETFs) on SGX. They are:

1. FTSE/XINHUA CHINA 25 ETF 
2. MSCI TAIWAN TRN INDEX ETF 
3. S&P 500 SHORT ETF 
4. S&P CNX NIFTY ETF (INDIA)

The names should give a clear indication of the region the ETF is invested it.  

The only one that needs a bit more elaboration is the S&P 500 short etf which is a form of inverse ETF. This ETF has a negative correlation to the S&P 500. It goes up when S&P goes down and vice versa.

All the ETFs are priced in USD. However, this does not mean you are exposed to the currency risk of the USD. A simple example will illustrate why.

Let’s say you own an apple valued at S$1.50. 

The apple is traded on the SGX priced in USD.

Assume the value of the apple (in S$ terms) stays constant.

If the S$ to USD exchange rate is 1.50 to 1 today, the price of the apple will be quoted at US$1. If you sell your apple, it will get you S$1.50 after currency conversion.

Now, if the USD$ collapses to 1:1 with S$, your pricing of the apple will become US$1.50 even though the value of the apple has remained constant at S$1.50. If you sell the apple and change the currency back to S$, you will end up with S$1.50.

Conversely, if the US$ strengthens to S$3 is to US$1, then the pricing of the apple will become US$0.50. If you sell the apple and convert the proceeds back to S$, you will still end up with S$1.50.

So technically, changes in the exchange rate should not affect the vaule of your apple.

Pricing assets in USD doesn’t automatically make it a USD based asset. It’s the underlying that matters.

For example, in the case of the Taiwan ETF, the Taiwan dollar to SGD exchange rate would have an effect on your returns.