Singapore's Banking Shakeup Could Affect "EWS" ETF

Singapore will soon offer applications for digital banking licenses through the end of the year, which could shake up its current financial industry. This could put Singapore-focused ETFs on watch, such as the iShares MSCI Singapore ETF (NYSEArca: EWS), which tracks the MSCI Singapore Index.

Per a CNBC report, the “Monetary Authority of Singapore (MAS) on Thursday said it will now accept applications for five new digital bank licenses until the end of the year. MAS, both a regulator and the central bank of Singapore, announced in June that virtual bank licenses will be issued as part of “Singapore’s banking liberalization journey.”

EWS seeks to track the investment results of the MSCI Singapore 25/50 Index, which is designed to measure the performance of the large- and mid-cap segments of the Singapore market. A capping methodology is applied that limits the weight of any single component to a maximum of 25% of the underlying index.

Slow Growth For Singapore

Singapore’s economy churned out its slowest annual growth in 10 years during the second quarter as its manufacturing sector continued to decline, according to preliminary data. Compared to a year ago, gross domestic product (GDP) expanded 0.1 percent in the second quarter, which fell below the 1.1 percent forecast from a Reuters poll and the revised 1.1 percent growth for the period January thru March.

This latest figure represents the slowest year-on-year GDP growth since the second quarter of 2009 when GDP fell by 1.2 percent. Further weakness could show itself as the U.S.-China trade impasse continues.

“Singapore’s highly export-driven economy leaves it very exposed to the US-China trade war and the broader slowdown in world trade. Singapore’s concentration in the electronics sector during a global tech-slump and technology war also take a toll on the economy,” wrote the ING’s chief economist Robert Carnell in a note. “We don’t see any prospect for a substantial improvement in these areas any time soon, though the rate of decline could now be moderating. Nevertheless, the longer the manufacturing sector remains depressed, the more likely this weakness will spill over into services and other sectors.”

The latest IMD’s 2019 World Competitiveness Rankings saw Singapore surpass the United States to claim the title of the world’s most competitive economy. According to Switzerland-based business school IMD, Singapore’s immigration laws, advanced technological infrastructure, availability of skilled labor and efficient ways to set up new businesses helped it reach the top.

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