Deutsche Asset & Wealth Management (DeAWM), the asset management division of Deutsche Bank, has announced the launch of the db x-trackers II Markit iBoxx ABF Indonesia Government UCITS ETF (SH8) on the Singapore Exchange (SGX).

Deutsche Asset & Wealth Management has launched an Indonesian government bond ETF on the Singapore Exchange. (© Gunawan Kartapranata)

The fund, which tracks the Markit iBoxx ABF Indonesia Government Index, offers exposure to local currency debt issued by the Indonesian central government and is the first out-and-out emerging markets bond ETF to be listed by DeAWM on SGX.

Indonesia is a G20 country and a member of the Asean group of nations. It has been one of the world’s best performing economies over the last few years.

However, Standard & Poor’s, a credit rating agency, recently downgraded its outlook on the country, arguing that the government’s reform momentum was fading. Furthermore, the country’s central bank, Bank Indonesia, recently had to raise interest rates by 50 basis points in a bid to combat inflation and stem worrying capital outflows.

Nevertheless, the fund will appeal to large numbers of international investors attracted to the long-term prospects of the world’s fourth most populous country (c. 238 million), many of whom may not previously have been able to access the asset class.

Chris Siniakov, head of fixed income, Asia, at DeAWM, said: “Long term, we are excited by Indonesia’s economic development. In the short term, we are encouraged by Indonesia’s pro-active response to rising inflation expectations and to maintain financial system stability in periods of heightened global financial market volatility. Market pricing adjusts very quickly to changing circumstances and market levels currently look compelling to long-term investors.”

Marco Montanari, Head of Passive Asset Management, Asia Pacific, DeAWM, added: “Being the fourth most populated country in the world and with a yield over 6% and a debt-to-GDP ratio below 30%, Indonesia is indeed an appealing market to both regional and global investors.”

The listing brings the total number of ETFs on SGX to 89, of which 12 are linked to fixed income securities.

Jenny Chiam, Head of Securities at SGX, said: “We welcome this new ETF listing by Deutsche Asset & Wealth Management. This is the first time investors can invest in an Indonesian sovereign bond efficiently via an ETF. This ETF also gives investors an additional opportunity to access the growing Indonesian economy.”

The fund is UCITS compliant and registered in the United Kingdom, Germany, Ireland and Singapore. It is eligible for UK SIPPs and has UK Distributor Status.

It comes with a total expense ratio (TER) of 0.40%.