Can’t decide between Grab and Sea Ltd? Here’s an ETF to gain access to ASEAN tech giants

This post was created in partnership with CSOP Asset Management Pte. Ltd. All views and opinions expressed in this article are Beansprout's objective and professional opinions. 

What happened?

Shopee, Grab and Gojek are probably familiar names to most Singaporeans, whether you are shopping online or hailing a ride to your dinner appointment. 

These technology companies have become more intertwined with our daily lives with the convenience they are able to offer. 

In fact, online sales have grown to 13% of total retail sales in March 2023 from just 5% in March 2019, according to data from the Ministry of Trade & Industry. 

Looking around, it’s not just within Singapore that we have seen such significant growth in the proliferation of technology companies. 

Southeast Asia has been a hotbed of technology development, boosted by rising consumer incomes and the adoption of digital solutions. 

Let’s take a further look at why everyone’s so excited about the Southeast Asian technology sector. 

#1 – Booming working-age population and new consumers

Here’s something you may not know – Southeast Asia is the most populous region in the world after India and China. 

The region is home to close to 690 million people as of June 2023, according to Worldometer. 

Not only does Southeast Asia have a large population, but they are also young and tech-savvy, and hence more likely to spend time on social media and do their shopping online. 

And here’s another trend that makes Southeast Asia so exciting – its working-age population is expected to increase by 40 million by 2030. In contrast, China’s working-age population is forecasted to fall by 30 million over the same period! 

With rising incomes, this will bring about many new consumers with the ability to spend more across the region. And when they do so, it will likely be on a digital platform. 

#2 – Fast growing internet sector

Against this backdrop, it is no surprise that the total number of internet users in Southeast Asia has grown to 460 million in 2022 from 360 million in 2019. That’s a sharp increase of 100 million internet users in just three years! 

This has led to forecasts that the Southeast Asian digital economy could reach up to $1 trillion in gross merchandise value in 2030 from $200 billion in 2022. 

That would represent a growth of close to two times the economic growth over this period of time. And let’s not forget this – Southeast Asian economies are already expected to be some of the fastest-growing in the world! 

Investing in the ASEAN technology sector

For retail investors wanting to invest in the growing technology sector, it has often come down to a few single stock names which are listed mainly in overseas markets. 

However, some investors may find it difficult to pick the winners even against the backdrop of a growing technology sector.

After all, it might be hard to predict whether e-commerce or food delivery will grow faster, or whether another ride-hailing company will be launched to disrupt the incumbents. 

Introducing the CSOP iEdge Southeast Asia+ TECH Index ETF

The CSOP iEdge Southeast Asia+ TECH Index ETF offers investors exposure to the rapidly growing digital economy in Southeast Asia. 

This is done by holding a basket of stocks which are based in Singapore, Indonesia, Thailand, Vietnam, Malaysia and India. 

These companies are involved in technology-related sectors such as e-commerce, ride-hailing & food delivery, fintech, online travel, and online media. 

As its name suggests, the CSOP iEdge Southeast Asia+ TECH Index ETF tracks the performance of the iEdge Southeast Asia+ TECH Index.

What are the top 10 holdings of the iEdge Southeast Asia+ TECH Index?

The key constituents of the index include familiar names such as Sea Ltd, the parent of e-commerce company Shopee, as well as Grab Holdings. 

Some other notable names in index include leading tech hardware companies in Southeast Asia such as Delta Electronics and Venture Corp. 

To provide diversification from just ASEAN tech names, the index also includes Indian tech companies such as Infosys and Wipro, which are leading IT services companies that are listed in the US. 

The iEdge Southeast Asia+ TECH Index has a maximum holding of 30 stocks, and the top 10 holdings are shown in the table below. 

On aggregate, the country of listing of these companies are fairly diverse, with 43% of these companies listed in the US. The remaining of these companies are split between listings in Thailand, Indonesia, Singapore and Malaysia. 

Looking at the revenue breakdown, the diversification is even more significant. Indonesia represents the largest market for these companies based on revenue generated. Investors however will get exposure to many other fast-growing and large markets such as Thailand, China, and India.

What are the risks of the CSOP iEdge Southeast Asia+ TECH Index ETF?

#1 – Profitability of some technology companies still unproven

As with industries in a stage of rapid growth, there is uncertainty relating to whether these companies can deliver on growth expectations, and continue to do so in a sustainable way. 

For example, some e-commerce players have been cutting back on promotions and discounts to boost profitability. 

However, it remains to be seen if such a reduction in incentives will slow down the adoption of their services.

#2 – High interest rates could dampen the valuation of technology companies.

We’ve seen the US Federal Reserve raise interest rates to bring down inflation over the past year. 

However, the valuation of high-growth companies has also come down with the rising interest rates, as investors gravitate towards less risky assets such as government bonds. 

While there are expectations that the Fed may start to pause on its interest rate hikes, sustained high interest rates could continue to dampen the valuation of these technology companies. 

How to invest in the CSOP iEdge Southeast Asia+ TECH Index ETF?

The CSOP iEdge Southeast Asia+ TECH Index ETF is expected to list on the Singapore Exchange on 20 June. The SGD Counter Stock Code is SQQ and the USD Counter Stock Code is SQU.

Investors who are interested in the ETF can subscribe to the Initial Offering Period through these authorized distribution brokers; Phillip Securities, iFast FSM One,  moomoo SG, Tiger Brokers and through DBS ATMs and its mobile app.

Thereafter, investors who wish to invest in the ETF can do so via their regular local stock brokers, just like how they go about buying regular stocks for their portfolio. 

The Singapore dollar version of the ETF is priced at S$1 per share. With a minimum lot size of 1, this would mean that you would be able to access the CSOP iEdge Southeast Asia + TECH Index ETF for as little as S$1, excluding brokerage fees and other exchange fees. 

The CSOP iEdge Southeast Asia+ TECH Index ETF is classified as an Excluded Investment Product (EIP), which means there are no additional requirements for investors to meet to invest in it. 

What would Beansprout do?

There are many reasons to be excited about the growing technology industry in Southeast Asia. 

For investors who want to get exposure to rising digital adoption in the region but do not want to spend time analyzing stocks, the CSOP iEdge Southeast Asia+ TECH Index ETF offers a convenient way to get access to these companies.   

The ETF offers you diversified exposure to a basket of technology leaders in the region, including Sea Limited and Grab.

So before you next use your e-commerce or ride-hailing app, read more about the CSOP iEdge Southeast Asia + TECH Index ETF here. 

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