MyETF Thomson Reuters Asia Pacific ex-Japan Islamic Agribusiness

Below are the questions post from clients related to the launch of IPO, MyETF Thomson Reuters Asia Pacific ex-Japan Islamic Agribusiness ("MyETF-AGRI").

1. May I know what is this offering?
2. Does this IPO related to the financial market data service provider Thompson Reuters?
3. How does it related? Is it a good option to buy? What do you think?

----------------------------------------

My reply as below:

This one is ETF (Exchange Trade Fund) base on Thomson Reuters Asia Pac Islamic Agribusiness as benchmark Index Shariah Methodology. Meaning, the fund will buy those companies in their Benchmark Index, they may review and rebalance semi annually and provide the NAV (Net Asset Value) on daily basis. (normally the stock price for ETF will follow NAV closely)

Currently their top 10 constituents (make up almost 53%) of the Benchmark Index and their respective weightings are as follows, however, they may change the securities base after quarterly review:

1. Ottogi Corp (Korea)

2. China Huishan Dairy Holding Co Ltd (Hong Kong)

3. Standard Foods Corp (Taiwan)

4. China Mengniu Dairy Co Ltd (Hong Kong)

5. Nufarm Ltd (Australia)

6. Taiwan Ferfilizer Co Ltd (Taiwan)

7. Universal Robina Corp (Philippines)

8. Kuala Lumpur Kepong Bhd (Malaysia)

9. PPB Group Bhd (Malaysia)

10 Nestle (M) Bhd (Malaysia)

The fund's will invest in 8 countries, including Malaysia (30.1%), Australia (18.4%), Hong Kong (15.1%), Taiwan (13.7%), Korea (8.7%), Indonesia (6.8%), Philippines (5.1%) and Thailand (1.9%). According to the i-Vcap, MyETF-AGRI , the Index provide average return of 8.8% per annual, though past performance may not indicate similar return in future.

Question: How to make money from this ETF?

Simple, buy low and sell high. Basically how you make money from ETF depends upon the underlying investment of the ETF. (since we already know the top 10 holdings of the fund) If most of the stocks in the basket fall in price, the NAV will fall. When most of stocks in the basket rise, the NAV value will rise as well.

Another reason why people invest in ETF is to reduce the risk of investing in single stocks. Just imagine invest 100% of your money into a single stocks, if the company go bankrupt, then all the money will gone. However, if invest into ETF which the fund manager invest into a basket of stocks base on the Benchmark Index, the fund manager will do their job to delete (to sell) or to add (to buy) or what we call rebalance, this will provide diversify effect and reduce the risk of single stock. Of course, the fluctuation will be less, hence reduce the excitement of making a lot (or make huge lost) of money in single stocks.

My opinion, if you are interested in this ETF, no need to rush for the IPO. The reason is, since they use the fund raise from IPO to buy the above basket of stocks, on first few days, the NAV may price around RM0.98 to RM1.02. So, you can always place RM0.99 or RM0.98 for the buy order on listing day. (IPO price is RM1.00) Who know's if market crash few days after listing (or you can wait till market pull back), the NAV may fall as well. (my point is take advantage on market fall, buy ETF to keep and hold it till market up)

IPO closing date is 19 Nov 2015, the tentative listing date is 03 Dec 2015. The stock code and name is 0826EA & METFAPA, For more info, you may refer to MyETF-AGRI web page.

P/s: The past record show that My-ETF trade with very low volume and lack of market maker, hence, it's not advisable to invest into it if you were to trade more than 10,000 unit.