Alternatives to STI ETF

[Shiny Things]

I am betting that the HKD-USD peg will break in near future when USD crash. Quite a number of forex experts are predicting that already.

Are you talking about Kyle Bass? He's betting on the opposite thing to what you're betting on.

Hayman is betting on the peg breaking because the HKD collapses (USDHKD goes up); from what you said upthread, you're betting on the peg breaking because the USD collapses (USDHKD goes down).

 

[BBCWatcher]

They have natural resources which I believe it is also a diversification on top of tech or financial or reits exposure say in China, Singapore and Hong Kong

Plenty of countries have natural resources: Russia, Canada, the United States, Brazil, Argentina, South Africa.... It’s a long list.

 

[BBCWatcher]

I dun use IWDA, I hold a few funds, in total my portfolio is more diversified.

It’s also more expensive. If you feel IWDA lacks adequate diversification for your stock holdings then just buy VWRA. (I don’t think IWDA does, but if.)

 

[supersnail0]

Hi supersnail0,

Yes, I am aware of that too. I am not venturing into individual stocks so I think liquidity shouldn't be too big of an issue.

I have sufficient US exposure with VHVE/VFEA so I wouldn't want to overweight the US. I am considering having a very small bit of "home/regional bias" and am not sure if allocating 10% of my portfolio to the HK (Hang Seng Index), a Total China ETF or an Asia Pacific ETF makes sense.

Ideally I would like to use my SRS funds for implementing this small tilt to Singapore/our region but our options are really limited unfortunately...

When i say liquidity, it not only means whether there is other people buying or selling the stock. It also means whether there is enough buying power/selling power to push/pull the stock price up/down. If u were to invest into the US via a SGX, Do u really think the price will go up as much as invest into the SPY itself? i doubt so.. Investing is all about risk and reward. How much you wanna invest into the market (in this case youre referring to HK) is also base on how much potential lost is there in the market/stock youre investing. Say HSI, now the price is considered relatively low as within the span of past 4-5 years. What is your risk to reward for a relatively lower priced stock? do your calculation and invest accordingly.

 

[chrisloh65]

People should avoid IWDA and VWRA because they have too much exposure to US stocks and USD collapse in future is highly likely.

Read this article if you want to:
https://www.barrons.com/articles/th...-the-u-s-dollar-plunges-isnt-gold-51592994601

What’s the Best Place to Invest Before the U.S. Dollar Plunges?

It’s also more expensive. If you feel IWDA lacks adequate diversification for your stock holdings then just buy VWRA. (I don’t think IWDA does, but if.)

 

[chrisloh65]

USD is predicted to collapse in future, and written by American:

https://www.barrons.com/articles/th...-the-u-s-dollar-plunges-isnt-gold-51592994601

What’s the Best Place to Invest Before the U.S. Dollar Plunges?


Kyle Bass? Another staunch anti-China American like Gordan Chang and You purposely making many false bad claims about China?
There are many Americans like that out there, no wonder people said Americans are most racist!
No need to look far, just look at how they treat their own Black Americans and Hispanic Americans you will know!
#ICantBreath#

Are you talking about Kyle Bass? He's betting on the opposite thing to what you're betting on.

Hayman is betting on the peg breaking because the HKD collapses (USDHKD goes up); from what you said upthread, you're betting on the peg breaking because the USD collapses (USDHKD goes down).

 

[celtosaxon]

People should avoid IWDA and VWRA because they have too much exposure to US stocks and USD collapse in future is highly likely.

Read this article if you want to:
https://www.barrons.com/articles/th...-the-u-s-dollar-plunges-isnt-gold-51592994601

What’s the Best Place to Invest Before the U.S. Dollar Plunges?

The author of that article doesn’t seem to have a great solution. He recognizes we live in a global economy with multinational companies that manufacture and sell all around the world. These companies have exposure to many currencies, despite where they may be headquartered.

When the US sneezes, the rest of the world catches a cold. If the USD collapses we are all in trouble. If you have great confidence in that outcome, why not take a short position?

 

[believeinyourself]

I thought hard over about it and I think I'm going to go without any home country bias at all for the equity section of my portfolio (0% ES3) since I believe currency volatility is much smaller than the volatility in equities.

I will start to accumulate MBH and maybe some ES3 about 10 to 15 years prior to retirement but not at this moment.

Some resources that I found to be helpful:
indexfundinvestor.eu/2019/07/18/simple-portfolio-for-european-investors/

youtube.com/watch?v=qYedjI03Q0g

 

[chrisloh65]

Strange that you claimed that "The author of that article doesn’t seem to have a great solution"?
The author clearly proposed a good solution to USD collapse problem since he needs to answer the title of his article "What’s the Best Place to Invest Before the U.S. Dollar Plunges?"!
Did you really read the whole article and comprehend it properly?

Oh, just to quote the author, he said avoid USD assets and US stocks (even though some (like you) would argue quite some US companies derive significant revenue from outside of US but they will still be affected by USD collapse)!

The author of that article doesn’t seem to have a great solution. He recognizes we live in a global economy with multinational companies that manufacture and sell all around the world. These companies have exposure to many currencies, despite where they may be headquartered.

When the US sneezes, the rest of the world catches a cold. If the USD collapses we are all in trouble. If you have great confidence in that outcome, why not take a short position?

 

[razoreigns]

.....I believe currency volatility is much smaller than the volatility in equities.

You don't actually need to guess this, you can check the historical volatility. Having said this, over the long term, the volatility does not really matter.

 

[Kaypohji]

Check from where ? Which source or platform ?

You don't actually need to guess this, you can check the historical volatility. Having said this, over the long term, the volatility does not really matter.

 

[BBCWatcher]

So let’s suppose for sake of argument the U.S. dollar depreciates relative to other major currencies, after adjusting for inflation across currencies of course. (Real movements are what matter.) What can we learn from history?

Well, the U.S. dollar depreciated against other major currencies quite significantly during the latter half of the 1980s. Please note that to some extent the Singapore dollar would track right along. The Monetary Authority of Singapore manages our local currency within a fairly narrow band pegged to a trade-weighted basket of currencies. The U.S. and U.S. dollarized/pegged countries are major trading partners. But the Singapore dollar wouldn’t depreciate as much in this hypothetical, so we would see the exchange rate creep from today’s roughly 1.39 to let’s suppose 1.2.

What then? Well, not much. Aside from the weirdly temporary U.S. stock market crash in October, 1987 (which was probably unrelated), U.S. stock markets shrugged off the dollar’s fall.

A weaker U.S. dollar would be broadly good news for U.S. exporters, and there are a lot of them. Companies like Boeing, Caterpillar, ADM, and many others are rather happy with a weaker U.S. dollar, and so are their shareholders. A weaker dollar tends to boost as reported earnings among U.S. listed companies, and they then often turn around and buy back shares and/or boost dividends. Inward tourism to the U.S. would pick up (post COVID-19) because it’d be that much less expensive in relative terms to visit Disney World and the Grand Canyon.

 

[chrisloh65]

Say you are a Singaporean residing in Singapore and holding USD Assets worth USD1 Million bought at S$1.40 per US$ or costing you S$1.4 Million.
Then USD collapse 50% to S$0.70 per US$, then your USD assets in S$ terms would only be worth only S$700,000 ! S$700,000 is what you can take back to spend in Singapore

Clearly there is huge impact to that Singaporean residing in Singapore, not no effect.
The rest of whatever you said is only applicable to somebody who is residing in US, not Singapore.

So let’s suppose for sake of argument the U.S. dollar depreciates relative to other major currencies, after adjusting for inflation across currencies of course. (Real movements are what matter.) What can we learn from history?

Well, the U.S. dollar depreciated against other major currencies quite significantly during the latter half of the 1980s. Please note that to some extent the Singapore dollar would track right along. The Monetary Authority of Singapore manages our local currency within a fairly narrow band pegged to a trade-weighted basket of currencies. The U.S. and U.S. dollarized/pegged countries are major trading partners. But the Singapore dollar wouldn’t depreciate as much in this hypothetical, so we would see the exchange rate creep from today’s roughly 1.39 to let’s suppose 1.2.

What then? Well, not much. Aside from the weirdly temporary U.S. stock market crash in October, 1987 (which was probably unrelated), U.S. stock markets shrugged off the dollar’s fall.

A weaker U.S. dollar would be broadly good news for U.S. exporters, and there are a lot of them. Companies like Boeing, Caterpillar, ADM, and many others are rather happy with a weaker U.S. dollar, and so are their shareholders. A weaker dollar tends to boost as reported earnings among U.S. listed companies, and they then often turn around and buy back shares and/or boost dividends. Inward tourism to the U.S. would pick up (post COVID-19) because it’d be that much less expensive in relative terms to visit Disney World and the Grand Canyon.

 

[streetfighter]

I found this in the article:

if you agree with Roach and others that the dollar will soon fall, now is the time to increase your exposure to international equities. One of the least expensive ways to get this exposure is with the Vanguard FTSE All-World ex-US Stock exchange-traded fund (ticker: VEU), which sports an expense ratio of 0.08% (equivalent to $8 for $10,000 invested).


Even though S&P 500 companies are deriving an increasing proportion of their sales from outside the U.S., a growing proportion of their expenses are outside the U.S. as well. Absent any currency-hedging activities, any changes in the foreign-exchange value of the dollar will hurt one side of these companies’ ledgers while helping the other—and largely cancel each other out.

The author of that article doesn’t seem to have a great solution. He recognizes we live in a global economy with multinational companies that manufacture and sell all around the world. These companies have exposure to many currencies, despite where they may be headquartered.

When the US sneezes, the rest of the world catches a cold. If the USD collapses we are all in trouble. If you have great confidence in that outcome, why not take a short position?

 

[BBCWatcher]

if you agree with Roach and others that the dollar will soon fall, now is the time to increase your exposure to international equities. One of the least expensive ways to get this exposure is with the Vanguard FTSE All-World ex-US Stock exchange-traded fund (ticker: VEU), which sports an expense ratio of 0.08% (equivalent to $8 for $10,000 invested).

First of all, that’s not a terrific answer simply based on fundamentals. A hypothetical depreciated dollar primarily bolsters U.S. exports (the likes of Boeing, Caterpillar, ADM, GE, etc.) and dampens U.S. imports. The U.S. is a superb, very large consumer market for international exporters, and you’d be getting a lot of them in VEU. They’d take a hit.

Second, VEU is a terrible fund for non-U.S. persons. It’s U.S. domiciled, so non-U.S. persons resident in Singapore pay foreign (non-U.S.) dividend taxes and then, after those taxes are collected, 30% dividend withholding tax. Meaning, in the first instance anyway, the effective dividend tax rate is higher than 30%. You might be able to claw back the foreign portion, eventually, to drop the dividend tax rate down to 30%. VEU is also U.S. estate taxable.

 

[celtosaxon]

Oh, just to quote the author, he said avoid USD assets and US stocks (even though some (like you) would argue quite some US companies derive significant revenue from outside of US but they will still be affected by USD collapse)!

Almost all companies in the world will be affected by a USD collapse. You could argue that foreign companies will be less affected, but companies with a large cost base in the U.S. in USD might also benefit more than foreign companies. I work for a U.S. based Fortune 100 company and we would certainly benefit, since more than half of our revenue is outside the U.S. but more than half of our cost base is inside the U.S.

 

[chrisloh65]

The fact that you said IB is the best broker to use is already wrong because IB is the worst broker to use for non-US person since they are subjected to estate duty for all money in IB. You can claim you can shift SGD out of IB free once a month, but foreign equities need to convert to foreign currencies and every time you convert back to SGD you lose money to forex, small amount adds up quickly.

And all those you said USD collapse means they will take a bit is hypothetical, not real, because this is like saying even if you hold foreign currencies you will get hit when USD collapse.

First of all, that’s not a terrific answer simply based on fundamentals. A hypothetical depreciated dollar primarily bolsters U.S. exports (the likes of Boeing, Caterpillar, ADM, GE, etc.) and dampens U.S. imports. The U.S. is a superb, very large consumer market for international exporters, and you’d be getting a lot of them in VEU. They’d take a hit.

Second, VEU is a terrible fund for non-U.S. persons. It’s U.S. domiciled, so non-U.S. persons resident in Singapore pay foreign (non-U.S.) dividend taxes and then, after those taxes are collected, 30% dividend withholding tax. Meaning, in the first instance anyway, the effective dividend tax rate is higher than 30%. You might be able to claw back the foreign portion, eventually, to drop the dividend tax rate down to 30%. VEU is also U.S. estate taxable.

 

[chrisloh65]

You benefit, but Singaporeans residing in Singapore and spending in S$ loses big because they got back a lot less in S$ from US$ when USD collapse!
When there are uncertainties, because the company is going to be affected by USD collapse, that companies stock prices sure get hit first, paper-talk and throwing so much theory here is useless.

Almost all companies in the world will be affected by a USD collapse. You could argue that foreign companies will be less affected, but companies with a large cost base in the U.S. in USD might also benefit more than foreign companies. I work for a U.S. based Fortune 100 company and we would certainly benefit, since more than half of our revenue is outside the U.S. but more than half of our cost base is inside the U.S.

 

[celtosaxon]

Say you are a Singaporean residing in Singapore and holding USD Assets worth USD1 Million bought at S$1.40 per US$ or costing you S$1.4 Million.
Then USD collapse 50% to S$0.70 per US$, then your USD assets in S$ terms would only be worth only S$700,000 ! S$700,000 is what you can take back to spend in Singapore

Clearly there is huge impact to that Singaporean residing in Singapore, not no effect.
The rest of whatever you said is only applicable to somebody who is residing in US, not Singapore.

SGD is managed to a trade weighted basket of currencies, so investors here who are concerned about currency risk should watch that their holdings do not deviate too much from that trade weighted basket. The tricky part is assessing how much currency exposure the underlying companies in a given index have.

 

[chrisloh65]

So how are you going to watch your holdings when you are invested in IWDA that contains >65% of US stocks (many of which still derive significant revenues from within US itself)?
Your answer does not gel with the recommendation you are giving - to blindly DCA into index ETFs like IWDA blindly regardless of market conditions.
May be you want to give a solution to the USD collapse problem for people invested in IWDA who will be quite badly hit?

SGD is managed to a trade weighted basket of currencies, so investors here who are concerned about currency risk should watch that their holdings do not deviate too much from that trade weighted basket. The tricky part is assessing how much currency exposure the underlying companies in a given index have.