A Singaporean Treat for Your Portfolio

As a person who's passionate about traveling, I find myself intrigued when I learn about the success of certain cities and economies around the world. The latest report I came across highlighted the tiny island of Singapore. Recently Singapore was ranked third in Citigroup's latest Economist Intelligence Unit report in terms of competitiveness to attract business. It scored high on essential parameters like physical capital, financial maturity, environment hazards, and global appeal.

In case you're wondering why I'm talking about Singapore, I want to tell you what a huge growth story the nation seems to be. And I'm sure you would like to be a part of it, too.

This glowing review is just the latest in a series of feats by Singapore, which earlier bagged the top spot in the World Bank's "Ease of Doing Business" report. Here are some amazing things about the island nation worth knowing:

  • Despite limited natural resources, Singapore is the third-richest country in terms of GDP per capita after Qatar and Luxembourg, according to Forbes magazine.
  • The third-biggest oil refinery in the world is based in Singapore -- though the nation itself has no oil! And in case you didn't know, ExxonMobil (NYSE: XOM  ) and Royal Dutch Shell (NYSE: RDS-A  ) have their largest refineries in Singapore.
  • Singapore is emerging as one of the leading buyers of aerospace products. U.S. exports to the country were up over 10% last year from 2010 levels. Boeing's (NYSE: BA  ) order book from Singapore is getting heavier by the day. It recently bagged a huge order at the Singapore Airshow.
  • Its port was the busiest in the world until last year.
  • The nation boasts a remarkable literacy rate of nearly 96%.

Singapore is undoubtedly emerging as one of the hot spots for investments. So should you pack your bags and settle down in Singapore? Pshaw! There's an easy way of investing in the nation: a Singapore-based ETF. Here's a quick look at two of them.

Easy way to Singapore
The iShares MSCI Singapore Index Fund (NYSE: EWS  ) , which tracks the MSCI Singapore Index, gives you exposure to 34 companies, with a majority of its holdings dedicated to giant and large-cap stocks. The fund allocates 32% to the financial services sector and nearly 24% to industrials. This is good news, as the services sector has proven resilient in recent years. In 2011, service-producing industries clocked 4.4% growth, with the finance and insurance sector growing by a robust 9.1%.

To delve deeper, here are the fund's top four holdings (percentage of net assets in parentheses):

  • Singapore Telecommunications Limited (10.78%): Southeast Asia's largest phone company by revenue is undertaking major restructuring to increase its subscriber base. This includes buying California-based mobile advertising company Amobee.
  • DBS Group Holdings (10.53%): Southeast Asia's biggest bank posted record profits for the full year of 2011.
  • Oversea-Chinese Banking (9.43%): This bank saw its fourth-quarter net profits surge 18% from the comparable period last year as net interest income went up.
  • United Overseas Bank (9.43%): The company's fourth-quarter profits dipped 21% from a year earlier, but its net interest income grew 13% on an expanding loan book.

The other ETF, iShares MSCI Singapore Small Cap Index Fund (NYSE: EWSS  ) , which debuted this year, tracks the MSCI Singapore Small Cap Index. What differentiates it from the former ETF is the market capitalization of stocks it holds. This fund is the only one that gives you exposure to Singapore-based small-cap stocks. It has allocated a little more than 36% to the real-estate sector and around 10% to industrials. Remember, small-cap stocks can generate high returns. The fund's top holding, Suntec Real Estate Investment Trust, for instance, is up over 14% year-to-date.

The Foolish bottom line
According to Nomura Group, Singapore companies beat estimates by a huge margin in their last reported numbers. If Singapore continues to take off, these ETF stocks could climb substantially. The iShares MSCI Singapore Index Fund is up a whopping 20% year-to-date, while the iShares MSCI Singapore Small Cap Index Fund has gained 15% during the same period. Keep tracking these ETFs for any price dip while I plan my trip to the Lion City.

Also check out our special free report on ETFs that highlights three funds that are poised to soar in the economic recovery. Click here to get it!

Neha Chamaria does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of ExxonMobil. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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