Global ETF Strategy Weekly Global ETF Commentary

Refer to important disclosures at the end of this report

• DBS Group Research. Equity 5 Nov 2018

Overview in this Issue Regional Research Team equityresearch@ dbs.com • US non-farm payroll bounced by 250,000 jobs in October from hurricane-affected 134,000 jobs gain in September Key Global Market Indicators with wages increasing a strong 3.1% and unemployment KEY GLOBAL MARKET INDICATORS rate staying at 3.7% As of November 2, 2018 Wk YTD • US ISM declined to 57.7 in October from 59.8 in Value Price Chg % Chg % September due to tariff-induced inflation, shortages and MARKETS drop in domestic and new export orders WORLD INDEX* 85.78 2.79 -2.64 • Trade deficit in the US widened by 1.3% to $54.02 billion EAFE INDEX* 63.35 3.13 -9.90 EMERGING MKTS INDEX* 40.82 5.56 -13.37 in September USA: Dow Jones Industrial 25,270.83 2.36 2.23 • Global Manufacturing PMI Index declined slightly to 52.1 in S&P 500 2,723.06 2.42 1.85 October NASDAQ 7,357.00 2.65 6.57 • Eurozone Manufacturing PMI index dropped to 52.0 in EUROPE-Euro Stoxx 50 3,214.41 2.54 -8.26 October from 53.2 of the prior month CHINA-Shanghai SE 2,676.48 2.99 -19.07 JAPAN-Nikkei 225 22,243.66 5.00 -2.29 • UK's Manufacturing PMI declined to 51.1 in October from SINGAPORE 3,116.39 4.86 -8.42 53.6 in September due to lower demand from the CURRENCIES Eurozone as a result of Brexit US DOLLAR INDEX (DXY) 96.5420 -0.06 4.80 • China's General Manufacturing PMI index rose marginally USD/CNY 6.8907 -0.76 5.90 to 50.1 in October as export activities continued to soften EUR/USD 1.1388 -0.13 -5.14 USD/JPY 113.2000 1.15 0.45 • India's Manufacturing PMI index rose to 53.1 in October USD/SGD 1.3757 -0.31 2.97 from 52.2 of the previous month as new orders and COMMODITIES production grew at the fastest rate in four months GOLD per oz. 1,232.89 -0.05 -5.37 • Japan's Manufacturing PMI index rose modestly to 52.9 in OIL per bbl. WTI 63.14 -6.58 4.47 BONDS Wk bp YTD bp October from 52.5 in September as output, employment Chg Chg and new orders improved US Treas 10-Yr Gov't Yld 3.210 13.00 80.46 • Eurozone inflation was at 2.2% in October compared with US Treas 2-Yr Gov't Yld 2.900 9.00 101.70 2.1% of the prior month China Gov’t 10-yr Yld 3.560 -0.20 -36.60 JGB 10-yr yield 0.130 2.00 8.20 • Crude oil prices declined 6.58% to $63.14 per barrel as the Germany Bund 10-yr yield 0.430 8.00 -0.30 US announced giving waivers to eight countries to buy US- % Change Based on ETF Trackers (World-URTH, EAFE-EFA, sanctioned Iranian oil Emerging Markets-EEM), As of October 26 to November 2, 2018 • ETF Flows: US-listed ETFs had inflow of $6.6 billion last (in US Dollars) week as US equities received $3.2 billion and fixed income Source: ETF Asia Analytics, Inc., Bloomberg Finance L.P., had inflow of $2.6 billion. International equities had as of November 2, 2018 outflow of $34.1 million while international fixed income garnered $94.8 million. Asia Pacific had inflow of $406.3 million as Asia Pacific emerging markets had outflow of $12.4 million. • Weekly ETF Investment Focus: The Rise of Modern India and Investing in India ETFs

1. "The ETFs specifically mentioned herein may not be recognised, authorised or otherwise registered in Singapore for retail distribution. This research is intended for general circulation only and its contents do not take into the specific investment objectives, financial situation or particular needs of any particular person. Before deciding to purchase any ETF, an investor should seek advice from a financial adviser regarding the suitability of the investment product, taking into account his specific investment objectives, financial situation and particular needs.” 2. “DBS, in publishing this research on ETFs, and DBS HK in circulating the research, are not and should not be taken or considered as having made an offer, recommendation or solicitation to buy or sell the ETFs or to enter into a transaction or to participate in any particular trading or investment strategy. Any reference to any specific company, financial product or asset class in whatever way is used for illustrative purposes only and does not constitute a recommendation on the same.”

sa: JG, CW, CS Global ETF Strategy

Weekly Global ETF Commentary

Weekly Global ETF Wrap Growth was weak in Germany, moderately growing in France and Spain with solid growth in the Netherlands, US non-farm payroll bounced by 250,000 jobs in October Ireland, Greece and Austria. The weakness in the EU from the hurricane-affected 134,000 jobs gain in September, stems from the deterioration in the global trade cycle according to the Labor Department. Wage gains were due to protectionism, tariffs, and political uncertainties. stronger, up 3.1% from the earlier year compared with an annualized consumer inflation rate of 2.3%, the best wage • United Kingdom’s Manufacturing PMI Index dropped to increase in nearly a decade. While wage increases have 51.1 in October from 53.6 in September with the index improved, the gains continue to be softer than other periods reflecting the weakest expansion in more than two of low unemployment and productivity gains also lagged the years. Growth in output slowed down while both improvement during those periods. The unemployment rate employment and new orders declined. Foreign demand remained at 3.7%. The labor participation rate ticked up from the EU dropped due to Brexit uncertainties. slightly to 62.9% during the month while the broadest measure of unemployment which includes people too • Caixin China General Manufacturing PMI index rose discouraged to look for work and part-time workers looking marginally to 50.1 in October from 50.0 in the prior for full-time jobs declined slightly to 7.4%. month. The economy was broadly unchanged after its decline in September. New export business has now • The US Institute for Supply Management PMI Index deteriorated seven months in a row. Profit margins have declined to 57.7 in October from 59.8 in September. been squeezed as input costs have increased at a rate Sales of manufactured goods and new orders grew at a faster than output prices. Manufacturing sector remains solid albeit at a slower pace, continuing to reflect the weak, production costs continue to be under pressure positive impact of the tax cut and strong consumer and business confidence stayed subdued as the economy spending. Concerns center around tariffs raising import has not seen any signs of improvement. prices, shortages, and a significant drop in domestic and new export orders resulting in a 4-point decline to • India Manufacturing PMI rose to 53.1 in October from 59.9% in the production index. 52.2 in September as new orders and production increased the at the fastest pace in four months. It was • The trade deficit of the US widened by 1.3% in the strongest improvement for the economy for the year. September from the prior month to $54.02 billion due to Demand improved with robust growth in new orders increased imports of capital and consumer goods, although export sales were slower. Employment growth according to the Commerce Department. Imports and was the strongest in a year. Consumer, intermediate and exports both increased 1.5% during the month. Imports investment goods sectors all grew at faster rates as included computers, airplane engines, cellphones and domestic and to a lesser extent, export orders toys. Exports have been affected by the strong US dollar, contributed to the overall improvement in business up 4.8% for the year. activity.

• JP Morgan Global Manufacturing PMI Index for October • Japan Manufacturing PMI index rose moderately to 52.9 declined slightly to 52.1 from 52.2 in September as in October from 52.5 in September as output, output growth and new orders weakened to a nearly employment and new orders improved. Foreign demand two-year low. The consumer goods sector remained rose for the first time in five months. Input costs strong while intermediate and investment goods were at increased at an accelerated rate with manufacturers able their lower readings since late 2016. Developed markets, to pass the increase with higher output prices. primarily because of the US economic strength Manufacturers had higher sales to new and existing outperformed emerging markets. Export work clients in both the domestic and international markets. contracted in the EU, China, Brazil, other Asian The improvement in business conditions was helped by countries. the recovery from the recent typhoon.

• Final Manufacturing PMI for the Eurozone from • Inflation in the Euro area was 2.2% in October from IHS/Markit declined to 52.0 in October from 53.2 in 2.1% in September according to Eurostat with energy September. Trade anxiety have raised pessimism about being the largest contributor to the increase. The ECB the economic outlook. The worst hit were the left its benchmark interest rates unchanged last week. intermediate goods producers which supplies inputs to ECB President Draghi stated that he expects inflation in other manufacturers, experienced drops in output, new the Eurozone to pick up even with the economy orders and exports. Consumer goods showed solid gains. exhibiting some weakness.

Page 2

Global ETF Strategy

Weekly Global ETF Commentary

• Oil prices declined again for a fourth consecutive week Europe widened last month fueled by Italian budget as the US stated that it was giving waivers to eight discussions, Brexit negotiations and a global stock countries to buy Iranian crude oil. WTI oil prices declined market sell-off. Across the Pacific, the 10-year Japanese 6.58% to $63.14 per barrel last week. Countries which JGB yield rose 2.0 bps at 0.13% yield while the Chinese have not been identified but will most likely be included government 10-year bond yields declined by 0.20 bps at in the waiver list are India, Japan, South Korea and 3.562%. US bond markets suffered along with equities China. The US sanctions are slated to be put back on in October as interest rates continued to rise. In addition, November 5th. Russia’s crude oil production rose slightly the volatility from emerging markets filtered through US to 11.4 million bpd in October. In the US, commercial corporate and high yield bonds. Markets are crude oil inventories rose another 3.2 million barrels last reconsidering the pace of normalization with higher week to 426.0 million barrels while total motor gasoline yields driven by the growth outlook. inventories declined by 3.2 million barrels.

• The US Dollar Index (DXY) which measures the US dollar Weekly Global Investment Focus: The Rise of Modern against a basket of 16 major currencies was slightly India and Investing in India ETFs weaker by 0.06% to the 96.542 level this week and YTD gain of 4.80% as positive news came from the latest US Overview of the Issues: Modern India non-farm payrolls and the first time US wage growth exceeded 3% since the global financial crisis. The dollar • India and China are now widely acknowledged as the hit its highest level since June 2017. Meanwhile the euro planet’s next super economic powers. Rarely has the was weaker by 0.13% to $1.1388 against the US dollar ascent of these two nations been watched with such a for the week with the euro under sustained pressure mixture of awe, trepidation and opportunism. In just after the lackluster eurozone data was released this more than three decades, China has evolved toward a week. As the Japan Topix index suffered its 15th worst modern market economy with economic miracle as the month since 1980, the Japanese yen was weaker by world’s second largest economy with an annual 1.15% to 113.20 against the US dollar as the bull-bear astounding growth rate of 9.5% from 1980-2010 but market debate in the final months of 2018 centers on slowing down now to 6-7% and India, by 6-7%. India, value and the yen as haven status during crisis. The with its 1.3 billion population, half of them under the age Chinese yuan was up 0.76% against the US dollar to of twenty-five is expected to overtake China as the most 6.8907 for the week as President Trump commented populous nation in the world by 2025. It is often argued that he and Chinese President Xi had a good talk and that India with its wildly pluralistic society, fractional raised hopes for a US China trade deal, thus triggering a democratic political system and an independent media rise in yuan and Chinese stocks. Action between the two has the potential to show other emerging markets in the countries will require more than words and resolution of world that ethnic homogeneity and authoritarianism are the trade dispute truly matters for the markets. After the not the only best path to economic growth and surge in the dollar, emerging markets currencies have development. Yet doubts persist. Some economists and fallen 11.4% this year based on the EM foreign academics make the case on Why India may be destined exchange index and is trading at its lowest since 2009 to overtake China. Our aim in this weekly focus is to (ex-Chinese renminbi) and many analysts believe that the discuss the key issues about India’s potential from the EM versus the dollar is undervalued. For now, the dollar investment perspective point of view. This is not meant to remains the world’s major reserve currency. be an exhaustive white paper or a detailed research report but merely provide a platform for talking points on • Global bond yields were up during the week as markets the issues and outlook. For this weekly focus, we will rose globally in the US, Europe and Asia. The yield in the discuss (i) India; an overview of the issues (ii) Highlights of 10-year Treasury note rose 13 bps at 3.21%, the most in India’s Economic Outlook for 2018 and 2019 and (iii) almost a month after the Labor Department reported Conclude with the Indian Market Update and Investing in gains in wages and jobs market which signaled that Indian Exchange Traded Funds. Taking each of the issues economic growth is strong enough to support additional and challenges facing India into account follows: rate increases from the Federal Reserve. The sensitive 2- year Treasury yield rose 9.0 bps at 2.90%. The German • The Rise of Modern India. The Republic of India is the 10-year bund yield rose 8.0 bps to 0.43%. October was most populous democracy in the world and the largest marked by broad risk market volatility and continuation country in South Asia, second largest population in the of extreme price swings in the secondary market world with 1.3 billion people, seventh largest country in triggering more caution for investors. Credit markets in the world by area, fourth largest number of spoken

Page 3

Global ETF Strategy

Weekly Global ETF Commentary

languages per country and its economy became the Washington DC, it is polarization with only two parties world’s fastest growing in the G20 developing nations compared to almost 2,000 in India. The year 2014 was a since the last quarter of 2014, overtaking the people’s turning point in Indian politics as Narendra Modi, age 68 republic of China. Seventy-one years ago on August 15, was catapulted from the Chief Minister of Gujarat to 1947, more than two generations have passed since India India’s Prime Minister in May 2014 giving him power over gained freedom from British rule. In 1991, India abruptly the lives of 1.3 billion people, more than one-sixth of the changed economic course when it dismantled the tight world’s population. No other democratic leaders have a system of controls and permits known as the ‘License Raj’ wider sway. Modi is near his fourth anniversary in office that it had adopted after Independence. Since then India and due to run for reelection in May 2019 under the has been in an economic ascent. In the early 21st century, Hindu Bhartiya Janata Party (BJP). The Indian economy India is an increasingly confident, materialistic and has improved during his Administration except in 2018 as globalized place. In India, there is a significant global the emerging market Taper Tantrum hit India. The outsourcing services and is capturing an ever-greater government main reforms include the insolvency and share of software in the United States, Europe and Asia bankruptcy code. Steps have been taken to liberalize the and is developing a manufacturing sector that can FDI flows and improve the business climate which the compete in world markets. Its entrepreneurs and recent World Bank Report cites India for moving up 30 companies are becoming global competitors in everything places for Ease of Doing business. He introduced the from information technology to manufactured goods demonetization measure in 2016 and imposed the Goods while its consumers are doing record growth across and Services Tax (GST) in 2017. At the same time, multiple sectors from telecommunications to oil markets. questions have been growing whether the scope of It is also a country where urban and English middle Modi’s reforms matches his rhetoric. The half empty view classes are soaking up consumer brand culture as it were is just as valid for under Modi, rates of GDP growth, a new religion. At the same time India in the 21st century industrial production and domestic investment have slid. remains home to more than a third of malnourished Perhaps more important to voters is less corruption under children as defined by the United Nations, roughly 750 the Modi government than the one he replaced. Modi million people of India’s 1.3 billion population continue continues to pursue an agenda that sums up his slogan, to live in villages. Lack of access to all weather roads and ‘Sabka saath, sakba vikas.’ or Together with all, progress effective primary health care centers, despite economic for all. As general election approaches in early 2019, little growth, India continues to suffer from poverty with stands between Narendra Modi and a second term 27.5% of its population and almost half of its women do victory as India’s Prime Minister. not know how to read or write. But the character of India’s rise is also unusual since it is finally emerging as an • The Challenge of the Indian Economy. India has been important economic and political actor on the world among the fastest growing economy in the world over stage while remaining an intensely, spiritual and volatile the past few years, lifting millions out of poverty. The character in its politics. India does enjoy the attention in Government have initiated important structural reforms its role as a potential counterbalance to China as an to spur India to catch up with more developed nations element to the west with its expanding nuclear arsenal. and improve living standards for all. The year 2017 was After ten years of reform, India is making headway in its marked by key structural initiatives to build macro- potential with China challenged by a younger labor force economic strength, thus the first half of the year suffered with strategies in engineering and technology. India has despite global tailwinds. Challenging micro indicators shown to the world that when its people set an aside, the surge in the share market was fueled ambitious goal, mobilize the country and measure the domestically as well as foreign flows chased the good impact, it has the will and means to realize the potential macro-economic backdrop. Fast forward into 2018, India of the New Modern India. Became a victim of the Taper Tantrum of the emerging markets. Compared to the torrid year for the rupee which • Indian Politics and the Modi Policy. At its core, India’s has become a boon for India’s stock market, the rupee federalism is an answer to an enduring concern of weakened to become one of the worst emerging market modern Indian politics. How should the country combine currencies this year breaching Rs72 against the US dollar. democracy and regional diversity? The key issues are two- As one of the largest importers of oil globally, the country fold; How should the territorial communities be ruled and has been hurt by the rising crude since it imports 80 how should they be made an integral part of the largest percent of its oil which in turn weighed on its current polity. Seventy-one years after the independence, the account and the rupee. The weaker rupee however has tasks of governing India from the center gets more been a boost to Indian companies that earn substantial difficult every year If fragmentation is sapping Delhi. In portion of their revenues in the US and those that focus

Page 4

Global ETF Strategy

Weekly Global ETF Commentary

on exports. Aside from the rupee, the improving risks of tighter global financial conditions, slowdown in economy and growth in corporate revenues were more global growth, rising rates, protectionism and tariff significant. Following the transitory disruptions, India’s threats while domestic risks include tax revenue shortfalls economic growth is projected to recover in FY 2018/19 and delays in addressing the balance sheet problems of and strengthen in FY 2019/20 as stability-oriented macro the banking institutions and corporations. Key structural policies and progress on structural reforms kicks in. High challenges remain in the areas of labor market, land and foreign reserves and strong FDI inflows have helped product market reforms to address raising job growth, contain the external vulnerabilities. The risks to the investments and productivity. economy are tilted on the downside with the external

India: Medium Term Macro-Fiscal Outlook

Source: International Monetary Fund Country Report No. 18/254, August 2018

Other Challenges. To fulfill the aspirations of its people, ii. The Challenge of Interconnectivity. Inspite of its well- Indians will need to match the very best of their own creativity deserved reputation as one of the world’s leading and skills with the right technologies whether developed at information technology and software development home or adapted from abroad. The scale of the economic and hubs, India is far from being the connected society societal transformation is staggering. Can India meet the many foreigners imagine. Many Indians regard an challenge? The answer to that questions remains to be seen. information infrastructure as a higher priority than it is getting today i. The Challenge of Energy given India’s lack of iii. The Challenge of the Education revolution. Education in indigenous sources and local concerns about the impact India is woefully deficient both quantitatively and of exploiting these resources with the promising qualitatively. India should seize the opportunity to solution of greater energy efficiency and innovations in reinvent its education process. We know fully well how supply side like microgrids and renewable energy highly education is valued by Indian culture and the passions Indian have for pursuing a path to better lives.

Page 5

Global ETF Strategy

Weekly Global ETF Commentary

iv. The Challenge of Infrastructure and the quality of public excise duties on gasoline and diesel were lowered. India’s infrastructure—roads, water, sanitation, electricity, and median age is 28 years old, and nearly 66% of its population telecommunications. is of working age; it has the potential to take advantage of v. The challenge of Environmental Crisis. India today is an the demographic and see huge growth similar to China’s if it environmental basket case marked by polluted skies, improved labor market regulations. The country would see falling water tables, untreated wastes, disappearing higher levels of employment with reformation that allowed forests and faces the threat of rapid climate change due women to more easily enter the labor force. In the most to the accumulation of greenhouse gases. recent monetary policy meeting at the Reserve Bank of India, vi. The Challenge of Health Care for All. The need to the committee decided to leave interest rates the same. overcome current financial and human constraints and Further increases in the interest rate are likely as inflation rapidly advances the outreach and effectiveness of expectations are above target in the medium term. health services especially primary care has become a stimulus for innovation. Real Growth: India and G20 Peers vii. The Challenge of Demographic Dividend. Indian politicians and international economists are easily seduced by the notion of a “demographic dividend “as if any nation with a rising population can speak on a great boon. Asian Development Bank warned that a demographic dividend can become a demographic curse and foment social unrest if people are not provided with skills and work out a program on how to build and staff schools, work on how to grow food.

Adding it all up, anyone who visits India today may find it hard for India to overtake China in the near future, but when the fundamental drivers—growth in the work force, fixed India’s G-20 peers are Brazil, Russia, China, South Africa, Indonesia investment, productivity, over the longer run, the future looks and Turkey more plausible. The world has a stake in India’s success and Sources: Haver Analytics and IMF Staff Calculations much of the developing world faces the same issues and challenges that India does. For better or worse, India is where India’s monetary policy has been appropriate since the rate the future will be made. had been held at 6%, thus the monetary policy conditions are broadly neutral based on the natural rate of interest of about 1.45% and inflation expectations of one year forward is Highlights: Indian Economy and Outlook 4.8%. Inflation risks are tilted to the upside including higher oil prices, possible fiscal slippages, and recently announced Outlook for 2018-2019: The GDP of India in 2017 was $2.6 import duties. Tighter monetary policy will however make it trillion, a $332 billion increase from 2016. Growth is expected more challenging to revive the credit cycle. On October 26TH, to increase from previous projections to about 7.4% in both Viral Acharya, the Deputy Governor of the Reserve Bank of 2018 and 2019 given the recent implementation of the goods India (RBI) disclosed a dispute between the Bank and the and services tax, and further liberalization of foreign direct Government. The dispute, which has been simmering in investment policy. The goods and services tax essentially private for months threatens to wreck one of the created a free trade agreement amongst the population of the Government’s main policy achievements. Three years ago, country by removing internal trade barriers. The new tax is after a short bout with double digit inflation, the RBI and the expected to bolster growth, increase the amount of reliable government agreed on a target for annual inflation of 4% and jobs, and allow the government the opportunity to further created a monetary policy committee to set interest rates. invest in infrastructure. Cutting back on bureaucratic Inflation has remained subdued since then. But now the interferences, such as lowering tariffs and cutting back on Government wants to meddle. Tensions surfaced between the trade. Documentation requirements have improved the ease government and the country’s central bank. The Finance of which foreign entities can invest in India, and has therefore Ministry has been putting pressure on the Reserve Bank of increased the country’s presence in the global market. Activity India to ease monetary policy and lending restrictions. The in the private sector rose at a faster rate in the second quarter Bank’s deputy governor warned of catastrophic consequences of the fiscal year than it did in Q1. India imports nearly 80% if the government tried to interfere with its independence. of its oil; the merchandise trade deficit has recently increased Having granted the central bank independence, India’s due to the rise in oil prices. To combat increased fuel prices, government would have undermined it for a short-term gain.

Page 6

Global ETF Strategy

Weekly Global ETF Commentary

Indian Growth Drivers: Demographics, Exports, Foreign ● FDI: In 2016, India received its highest level of foreign Direct Investment, Information Technology direct investment at $45 billion which then decreased to $40 billion the next year. In 2017, the largest portion of ● Demographics: India is ranked 2nd in the world in terms FDI came from Mauritius which was responsible for of population with 1.3 billion people and is expected to 37.3% of investments. The next largest contributors to overtake China for the number one position within the FDI were Singapore (24.8%), the Netherlands (7.5%), next few years. The country’s population growth rate is the US (5.0%), and Japan (4.0%). In an effort to boost currently 1.1%. The Indian census doesn’t collect data foreign direct investment, the Indian government on ethnicity; it is estimated that 72% of the population reformed its FDI policy regarding the retail, airlines, and can be categorized as Indo-Aryan, 25% as Dravidian, construction sectors. The top five sectors that received and 3% as Mongol or others. The two official languages FDI in 2017 were: of India are Hindi, and English, although Tamil is also 1. Computer software & hardware (16%) common. Around 80% of the population practices 2. Telecommunications (14%) Hinduism; Islam is the next most common religion 3. Services sector (13.2%) (13%), then Christianity (2.3%), Sikhism (2%), Buddhism 4. Construction (7%) (0.8%), and Jainism (0.4%). The median age in India is 5. Trade (6%) 28, which is relatively low compared to other major countries such as China and the US with median ages of • Information Technology: Globally, India is the most 37 years old, and Japan at 49 years. popular country when it comes to outsourcing IT services. The IT sector of India was responsible for ● Exports: According to The World Factbook, India ranked producing roughly 8% of the country’s GDP in 2017; the 19th in world in terms of merchandise exports at roughly US was the most significant customer for Indian IT $296 billion in 2017. The country’s exported goods and services, accounting for approximately 66% of exports. services accounted for roughly 18% of GDP in the same The industry grew by $167 billion in 2017, is expected to year. The largest importers of Indian goods and services grow another 9% by the end of the year, and will likely are other Asian countries, accounting for nearly 51% of reach $350 billion by 2025. Indian exports in 2017. The next largest importers are European (19%), North American (18%), African (8%), Investing in India ETFs and Latin American (3%) countries. The country’s top 5 Emerging Markets (EEM) ETFs has been experiencing outflows exports in 2017 were: from broad emerging market products and some of it are 1. Gems (14.4%) worries tied to the China-US trade tensions. However single 2. Mineral fuels and oil (12.1%) country ETFs are receiving inflows as investors seeks to 3. Machinery including computers (5.6%) diversify away from China which accounts for 32.8% of the 4. Vehicles (5.5%) EEM Index breakdown. India is the fourth largest share of EEM 5. Organic chemicals (4.6%) with its 8.7% share and has been experiencing ETF outflows of $4,868.78 million YTD. If the correction in emerging Monetary Policy Stance and Real Interest Rates markets continues, India ETFs represents opportunities for the longer term. The case for considering investing in ETFs of India can be summed up as follows;

• The country has the highest GDP growth of all the biggest emerging markets. International Monetary Fund projects India’s growth at 7% and that could increase • India’s dynamic culture, large broad complex markets are generally misunderstood and underappreciated with its aspirational population and entrepreneurial spirit

• We believe India will drive attractive equity returns given favorable demographics and stable demographic institutions, strong educational system, extensive digital Sources: Haver Analytics, IMF Staff Calculations, Osorio Builtron and infrastructure that are transforming commercials others (forthcoming) “The natural rate of interest and its drivers: A systems, sustained structural reforms cross-country analysis”. 1/Stance = Natural Real Interest Rate – Real Policy Interest Rate

Page 7

Global ETF Strategy

Weekly Global ETF Commentary

• The size and scope of the investment opportunity in capital reversal has been less intense than the 2013 taper India includes nearly 6,000 listed companies which tantrum, thanks to India’s stability-oriented policies and includes more names than the US, Japan or China. India progress in structural reforms offers a well-diversified opportunity set that resembles The risks in India includes: It is not immune to global more the S&P 500 than the MSCI Emerging Market slowdowns, fragile relations with its neighbor Pakistan, social Index. There is high degree of confidence in the quality tensions rising across ethnicities and classes, systemic macro of management and governance. financial risks bear monitoring as the weak credit cycle could impair growth and sovereign bank nexus has created • India has been affected by the emerging market turmoil vulnerabilities, protectionism and trade tensions. since April when portfolio outflows were large as well as To us, India is an environment that offers myriad opportunities concerns over fiscal slippages and the banking system’s in this rapidly changing society. Consider investing in these exposure to the sovereign. Nevertheless, this episode of Indian ETFs as set in the following table.

Consider these India ETFs Price Assets Under Dividend Expense YTD % Ticker ETFs (in US Management Indicated Ratio % Return Dollars) (in Th. US Dollars) Gross Yld % INDA iShares MSCI India ETF 31.27 4,406,544 0.68 -11.58 -13.19 EPI WisdomTree India Earnings Fund ETF 23.23 1,433,146 0.84 -15.71 -13.96 INDY iShares India 50 ETF 32.85 741,128 0.94 -11.32 -9.79 SMIN iShares MSCI India Small-Cap ETF 36.32 240,549 0.80 -29.88 -25.22

PIN Invesco India ETF 22.78 206,567 0.82 -13.71 -12.42

Sources: ETF Asia Analytics, Inc., Bloomberg Finance L.P., November 2, 2018

Top 10 Weekly Winners and Losers Weekly Winners Weekly Losers ETF Sym 1-Wk % chg ETF Sym 1-Wk % chg Inv Solar TAN 9.0 ProS VIX ST Futures VIXY -8.8 IS MSCI So Africa EZA 8.2 IP VIX S ETN VXX -8.3 IS Phlx Sox Smcdct SOXX 7.6 United States Oil LP USO -7.1 VV Semicndctr SMH 7.5 Inv DB Oil DBO -6.8 SPDR S&P Homebldrs XHB 7.3 US Brent Oil BNO -6.6 IS MSCI China MCHI 6.8 ProS Short MSCI Emrg EUM -5.4 IS MSCI India INDA 6.5 ProS Short Russ 2000 RWM -4.3 EGShrs EM Consmr ECON 6.4 IS S&P GSCI Cmd ETN GSG -4.0 IS MSCI Taiwan EWT 6.1 Inv DB Commdty Idx DBC -3.8 SPDR Materials XLB 6.1 IS MSCI Mexico EWW -3.7 Source: IDB, November 2, 2018

The top ten winners for the week ended November 2nd were replacements for traditional fuel sources. The two dominated by six ETF sectors, led by energy related. Invesco semiconductors ETFs are recognized as the growth drivers and Solar (TAN), up 9.0%. two semiconductors (SOXX, SMH), one technology innovator for the entire electronics value chain homebuilder ETF (XHB), one EM Consumer (ECON) and one sector. Although the semiconductor ETFs have seesawed in Materials (XLB). The balance came from four specific country 2018 along with the tech sectors, their ETFS have been stable ETFs: China (MCHI), India (INDA), Taiwan (EWT) and South with impressive sales and returns. The fundamentals of the Africa (EZA). There is a good demand for solar product in line materials sector (XLB) have continued to strengthen over the with revolutionary transition underway in the renewable past 12 months bolstered by solid earnings growth and energy industry. The areas of rapid progress are energy storage appears to have inexpensive valuation relative to other sectors. and digitalization as solar and wind have become viable as Looking at the emerging markets, it seems the risks of the

Page 8

Global ETF Strategy

Weekly Global ETF Commentary

strong US dollar trend and US interest rate rising has already their worst week since February with WTI down 6.58% to been priced in which affected India and South Africa with $63.14 a barrel, extending a long decline on increasing supply acute pressure during the summer while. China’s ETF have now and worries over global growth. With Iran Sanctions set to rallied after the stimulus pledge following a meeting. take full effect November 4, uncertainty remains over the exact amount of crude oil that will be taken off the market. The top ten losers for the week ended November 2nd were led Meanwhile crude production from the OPEC and allies such by two volatility indices, ProShares VIX ST Futures (VIXY), as Russia and Saudi Arabia has been increasing over the past down 8.6% and iPath VIX S ETN (VXX) down 8.3%,two month and the supply surge has weighed on prices. Producers inverse ETFs, ProShares Short MSCI Emerging (EUM), three oil have increased production to fill the void and capex spending related ETFs, United States Oil (USO), US Brent Oil (BNO) and has been increased to add more production sources. The Invesco DB Oil (DBO), two commodity ETFs, iShares S&P GSCI country specific loser, Mexico had a rocky start as the Commodity ETN (GSG) and Invesco DB Commodity President elect Andres Manuel Lopez Obrador (AMLO) Index(DBC) and one country specific ETF Mexico (EWW). committed to axing the $13 billion new airport outside Commodities have been in a secular decline relative to the Mexico, already one third build and three quarters financed. S&P level. While commodity prices have risen recently, such Mothballing it was a key campaign promise. Mexican price gains often fail to translate to the relative performance investors and watchers remain hopeful with the new US- of the underlying sectors such as energy. This disconnect Mexico-Canada trade agreement and a stable macro often stems from the relative valuations of the stocks economy when AMLO takes over on December 1st from the themselves and sectors as energy remains expensive previous Nieto Administration. compared to their long-term averages. Oil prices tumbled in

Page 9

Global ETF Strategy

Weekly Global ETF Commentary

Performance of Selected Key ETFs Price Weekly YTD ETFs Ticker 11/2/2018 % Chg % Chg STOCK MARKET ETFs SPDR S&P 500 ETF Trust SPY 271.89 2.47 3.22 iShares MSCI All Country World Index ETF ACWI 69.57 3.11 -2.42 iShares MSCI EAFE ETF EFA 63.35 3.13 -9.90 PowerShares QQQ Trust Series 1 QQQ 169.38 1.63 9.35 iShares Russell 2000 IWM 154.00 4.42 1.89 iShares MSCI Emerging Markets EEM 40.82 5.56 -13.37 RISK MEASURES ETFs Chicago Board Options Exchange SPX Volatility Index VIX 19.51 -19.25 76.72 ProShares VIX Short-Term Futures VXX 36.68 -8.07 31.38 Chicago Board Options Exchange SKEW Index SKEW 115.73 -4.91 -15.56 PowerShares S&P 500 High Beta ETF SPHB 40.13 5.91 -4.45 PowerShares S&P 500 Low Volatility Portfolio SPLV 47.91 1.50 2.13 SECTOR ETFs Financial Sector Select SPDR Fund XLF 26.38 4.43 -4.31 Energy Select Sector SPDR Fund XLE 67.56 1.62 -4.55 Technology Sector Select SPDR Fund XLK 68.74 0.95 8.58 Communication Services Select Sector SPDR Fund XLC 45.84 2.78 NA Consumer Discretionary Sector Select SPDR Fund XLY 107.97 4.41 10.34 Industrial Sector Select SPDR Fund XLI 70.99 2.74 -4.98 iShares Transportation Average IYT 186.49 4.10 -1.82 SPDR S&P Metals and Mining XME 31.76 5.10 -11.49 78SPDR S&P Aerospace and Defense XAR 90.16 2.92 8.80 SPDR S&P Biotech XBI 83.96 4.40 -0.87 iShares Nasdaq Biotechnology IBB 108.10 4.33 1.42 PowerShares Cleantech Portfolio PZD 39.91 6.03 -5.13 iShares US Preferred Stock PFF 35.89 -0.58 -1.19 iShares iBoxx High Yield Corporate Bond HYG 84.27 0.05 0.87 iShares TIPS Bond TIP 108.28 -1.11 -2.83 INTERNATIONAL ETFs iShares China Large-Cap FXI 41.08 5.39 -9.83 iShares MSCI Japan EWJ 55.02 1.95 -7.47 iShares MSCI india INDA 31.87 8.55 -13.19 iShares MSCI Germany EWG 27.78 3.73 -13.84 iShares MSCI United Kingdom EWU 32.26 3.40 -7.80 iShares MSCI Brazil Capped EWZ 41.61 3.92 4.54 Van Eck Vectors Russia RSX 21.12 4.09 -0.42 COMMODITIES SPDR Gold Shares GLD 116.65 -0.10 -5.66 United States Oil Fund LP USO 13.31 -7.12 10.82 iPath Bloomberg Copper Sub-index Total Return JJCTF 31.06 2.85 -17.26

Sources: ETF Asia Analytics, Inc., Bloomberg Finance L.P., November 2, 2018

Page 10

Global ETF Strategy

Weekly Global ETF Commentary

Highlights of the Week: Performance of Key ETFs

• All the global stock market ETF indices gained during the week as global stock markets rebounded from a bruising October, led by iShares MSCI Emerging Markets (EEM) up 5.56% • October saw the return of volatility in the markets. However with the market rally this week, the CBOE Volatility Index (VIX) was down 19.35% to the 19.51 level • All the ETF sectors gained for the week as the US S&P 500 Sectors gained led by PowerShares Cleantech (PZD), up 6.03%. • All the developed markets ETFs (Excluding US) gained led by Germany • All the emerging markets ETFs were all up for the week led by India (INDA), up 8.55% • Industrial commodities were down except copper (JJCTF)

Key ETF Indices Comments

Global Stock Global stock markets rebounded this week after tumbling to new lows in tough October, with strong jobs Market ETFs reports, mixed reports on China trade talks. All the ETF stock market indices were up led by the Emerging Markets (EEM), up 5.56% but still down 13.37% YTD, the worst among the group. The SPDR S&P 500 (SPY), the oldest and largest ETF in the world serving as a benchmark for the US market was up 2.47% and back to its positive return of 3.22%. The World ETF (ACWI) and EAFE (EFA) rose 3.11% and 3.13% respectively but still down YTD especially EFA. The Tech laden QQQ was up 1.63% and a gain of 9.35% YTD. The small capped IWM did well, up 4.42%. What now? The US stock market suffered its biggest October decline since the 2008 financial crisis, prompting investors to reassess the bull run that started nine years ago. Was the big market drop a temporary setback or start of a bear market? Market optimists claims that the selling is overdone and the market’s underlying health is better than recent selling suggests while some investment pros won’t rule out further declines and must get past the coming midterm elections. There is hope for a cease fire in trade war between US-China, keep an eye on the Fed’s actions and fear on inflation. Sound investing rules are proving their worth.

Risk Appetite Market volatility is back. Based on options price on the S&P 500, the VIX tends to rise as stocks fall. For this Measures week, the CBOE Volatility Index (VIX) dropped 19.25% to the 19.51 level as well as the drop from the two other volatility indices SKEW and VXX. High Beta ETF (SPHB) and Low Volatility ETF gained. Investors have not been rushing into broad hedges to guard against further losses and index volatility has not recorded the outsize move in the prior February VIX peak of 37 versus VIX of 25.23 during the October sell off. To some, recent volatility has been stoked by company earnings rather than the broader concerns of an economic slowdown. Nonetheless, volatility has to be coped with.

ETF Sector All the ETF sectors gained during the week amid rising rates and slowing earnings gain. The laggard in the Investing group is the tech ETF, XLK up 0.95% for the week and a gain of 8.58% YTD. With internet companies shifting out of technology into communication services, some investors are concerned about the outlook for the current tech sector. The sector’s operating margins will be lower following the shift and expected earnings may also be reduced. However lower valuations may offset the tech’s slower growth outlook as the sector’s outlook remain constructive. As measured by free cash flow yield, cyclical sectors appear cheap relative to their defensive counterparts which historically has been an indication that cyclicals will outperform. Conversely, the fundamental backdrops for financial, real estate and utilities remain challenged. Utilities and financials continue to face headwinds but the outlook for financials is more constructive. If you are assessing the ETF sector allocation of your portfolio, materials, consumer discretionary, biotech and technology are best positioned in the coming months.

Page 11

Global ETF Strategy

Weekly Global ETF Commentary

Key ETF Indices Comments

Developed Developed markets ETFs all gained this week. Economic growth in the Eurozone slowed sharply in the third Markets ETFs quarter to 1.7% year-on-year compared with the 2.2% in the previous three months while inflation rose (ex-US) 2.2%, the highest since December 2012. iShares MSCI Germany gained 3.73% for the week and still down 13.84% YTD. Following her party’s poor result at a state election in Hesse, Angela Merkel announced that she will stand down as leader of her CDU Party in December when the post is up for biennial election. The timing could hardly be worse since EU is being buffeted by Brexit and the Italian fiscal crisis. Turning to iShares MSCI United Kingdom (EWU), Brexit continues to be the defining issue for the British people and its politics. The US economy performed fairly well in the third quarter while Philip Hammond, current chancellor of the exchequer with UK’s improved economic outlook and proclaimed that austerity in place since 2010 was finally coming to an end as the ratio of public debt to GDP which rose to 85% after the global financial crisis is now falling. There is a question over how long the good fiscal news will last. Worse, a no deal Brexit could send the economy into a spin. Across the Pacific, the iShares MSCI Japan (EWJ) was up 1.95% with its sustainable recovery in 2018 as reflected in its recent data; nominal GDP has been steadily growing with deflation ended and a buoyant job market with unemployment down to 2.3%. With the Bank of Japan’s supportive buying intervention, the market is awash with undervalued stocks, governance improvements and the expansionist policies of Abenomics.

Emerging Emerging Market ETFs all gained this week as the Emerging Markets Index (EEM) rose 5.56% while EM Markets ETFs stocks extended their recent rally to reach a four week high lifted by hopes of US Chindia trade breakthrough and opinions held by several analyst that EM currencies are the extremes of undervaluation against the US dollar. iShares MSCI India (INDA) led the group this week, up 8.55% In the latest World Bank Report published October 31st in ‘Ease of Doing Business’, India had climbed 30 places from the previous ranking. India passed goods and services tax that helped to boost its standing this year which required a constitutional amendment. We have more details on India’s outlook in this week’s investment focus section. iShares China Large Cap (FXI) gained 5.39% and still a loss of 9.83% YTD. The Chinese markets bounced up after a statement following a politburo meeting that the country needed to take stimulus steps to counter the pressures at home. China rose 32 places in the World Bank ranking of doing business. The yuan hit its weakest point since the financial crisis came close to breaking the symbolic mark of seven yuan to the US dollar. A weaker Chinese currency makes Chinese exports cheaper, a boon to Beijing in its battle to offset the US punitive tariffs. The iShares MSCI Brazil (EWZ) continues its gain this week up 3.92% as the stock markets rose sharply on expectations that the New President-elect Jair Bolsonaro will crack down corruption and reform the pension system and deregulate the economy. VanEck Vectors Russia (RSX) gained 4.09% with its sustainable recovery in 2018 and a beneficiary of the better oil revenues this year.

Industrial Industrial commodities were mixed this week. SPDR Gold Shares (GLD) was down this week as appetite for Commodities risk assets rallied strongly. Mining shares have not been spared from this year’s equity rout. For example, copper prices have dropped 18% in recent weeks. Its future prospects depend on the technological transition from gasoline powered to electric vehicles (EV). Even without EVs, global copper production is not producing enough to keep up with demand. Major increases in mined supply takes years to develop. The iPath Bloomberg copper sub index (JJCTF) gained 2.85% and YTD loss of 17.26%. With China consuming the lion’s shares of the world’s commodities, the economic impact from the US Sino trade conflict will be critical. Turning to oil ETFs, the United States Oil Fund LP (USO) declined 7.12% for the week as the US announced plans to give waivers to eight countries to buy Iranian crude oil and as stockpiles have climbed and worries over global demand growth.

Page 12

Global ETF Strategy

Weekly Global ETF Commentary

Key ETF Indices Comments

Summing Up Good riddance to the month of October dubbed as “Red October” for its garnered attention like no other with the worst sell-off since the global financial crisis of 2008. Markets were weighed down by investors’ jitters over a mixture of anxieties: signs of slowing global GDP, belief that profits may have peaked, the slowing Chinese economy, uncertainty about global trade with the tariffs tensions, and rising interest rates. Some $5 trillion was wiped off the value of shares. What happens now that the calendar has flipped to November? History suggests that flipping the calendar from one month to the next might be good. The “seasonality” quirk in Wall Street is in focus as we move from “Red October” to November with a reputation for being friendly to investors. For example, the Standard and Poor’s has posted gains for the past six Novembers while over the past 20 years, the third best month for the Dow Jones Average had average gains of 1.87%. November also flashes green as our mood improves with the holiday season just around the corner and anticipation of a yearend rally. In the Autumn season there is often the expectation of business activities consonant with the fall style weather but sometimes fall surprises us with hurricanes. Investors are again hoping that November will rescue the market. But in reality, such decisions can be made at any time; it’s unnecessary to invest by the Calendar. Just remember that there are real opportunities for the adventuresome investor and that the joys of living and investing are enhanced by the variability of the season. Remember Ecclesiastes 3:1.’There is an appointed time for everything and a time for every affair under the heavens.’

The World is your Oyster. Reach out to DBS Vickers Securities for advice and consultation.

Weekly U.S. ETF Flow Summary

Highlights of the Week • U.S. fixed income ETFs also showed $2,455.83 million inflows, reversing the previous week’s $1,645.44 million of • U.S. equity markets had ended a turbulent October on a net outflows. positive note and kicked off November on a solid footing on a confluence of corporate earnings and cooling of • International equity ETFs had weekly outflows of $34.07 trade war rhetoric’s. But a three-day relief rally came to a million, however, compared to the previous week’s halt as the better-than-expected September jobs report $1,211.84 million of inflows. pushed U.S. Treasury yields to the highest level since 2011, resulting in bond market-sell off and the tumble in equity • International fixed income ETFs continued to register net markets. For the week, the S&P 500 was up 2.42%, inflows of $94.78 million, down from $107.39 million putting its best performance since early March. The inflows in the previous week. Nasdaq Composite had its first weekly advance in five with a 2.65% gain, its strongest since early July. • Commodity ETFs registered another inflows of $178.65 million. Leveraged ETFs had weekly inflows of $622.08 • On the back of bargain buying, weekly inflows into U.S.- million, while inverse ETFs continued to see net outflows listed ETFs bounced back to $6,647.76 million, extending of $58.46 million over the same period. the previous week’s $3,701.41 million inflows, bringing their YTD inflows to $214.05 billion. Equity ETFs saw net • Asia Pacific ETFs listed in the U.S. continued to register inflows of $3,241.08 million, compared to $4,699.33 inflows of $406.31 million. Broad Asia Pacific ETFs took in million inflows the previous week, while fixed income ETFs $2.70 million, while Asia Pacific emerging market ETFs saw had net inflows of $2,550.61 million, reversing the another net outflow of $12.37 million.

previous week’s $1,538.05 million outflows. The U.S. ETF marketplace closed at $3,503.15 billion in total AUM. • In October, global equities suffered their worst month • U.S. equity ETFs led the inflows with $3,275.15 million of since May 2012, nearly $8 trillion of market cap was net inflows, following $3,487.49 million inflows in the wiped off and the S&P 500 index recorded losses in 16 of previous week. 23 trading days. Despite this volatility, U.S.-listed ETFs had monthly inflows of $4,390.39 million, primarily driven by

Page 13

Global ETF Strategy

Weekly Global ETF Commentary

non-U.S. exposure, which brought their YTD inflows to $376.88 million. The Invesco Senior Loan ETF (BKLN) also $215.12 billion. International equity ETFs took in faced net outflows of $369.26 million, representing $6,136.89 million, while U.S. equity ETFs suffered 5.52% of its AUM. $595.51 million of withdrawals. The hit streak is over for fixed income ETFs after posting net outflows for the first • Another notable asset loser included the iShares Core time in 39 months. U.S. fixed income ETFs faced MSCI EAFE ETF (IEFA). IEFA had weekly net outflows of redemptions of $5,030.83 million, largely led by $294.47 million the past week. $2,836.00 million outflows from equity-sensitive high yield. International fixed income ETFs showed $737.70 • For the week to November 1st, Asia Pacific ETFs listed in million inflows though. Commodities had $819.88 million the U.S. posted another weekly inflow of $406.31 million of inflows. thanks largely to $463.08 million inflows into China, bringing their YTD inflows to $1,724.80 million. Broad • During the week to November 1st, the short-term fixed Asia Pacific ETFs also saw weekly inflows of $2.70 million, income ETFs dominated the inflows list, taking advantage while Asia Pacific emerging markets ETFs had $12.37 of the safety and solid yields they provide. The SPDR million of weekly outflows. Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) pulled in $956.87 million, representing 17.99% of its AUM. The • For the past week, China posted the largest inflows of iShares 1-3 Year Treasury Bond ETF (SHY) registered $463.08 million, while Korea followed with $9.40 million $839.01 million inflows, or 5.56% of its AUM, while the of weekly inflows. Indonesia also posted weekly inflows of PIMCO Enhanced Short Maturity Active ETF (MINT) $4.42 million over the same period. garnered $497.58 million of inflows, or 4.36% of its AUM. The iShares Short Treasury Bond ETF (SHV) attracted • Meanwhile, India showed $25.26 million of outflows for $463.70 million inflows. the week. Japan saw net outflows of $22.25 million, while Hong Kong faced net outflows of $20.99 million. • Meanwhile, the broad-based U.S. equity ETFs also saw New Zealand had $2.24 million of weekly outflows. demand the past week. The iShares Russell 1000 Value ETF (IWD) posted $651.11 million inflows for the week, • Among individual ETFs, China-focused ETFs dominated and the Vanguard Total Stock Market ETF (VTI) garnered the inflows list the past week. The iShares China Large- $553.26 million of inflows. The iShares Core S&P 500 ETF Cap ETF (FXI) had $267.85 million of inflows, representing (IVV) showed net inflows of $549.02 million, while the 5.41% of its AUM. The iShares MSCI China ETF (MCHI) Vanguard S&P 500 ETF (VOO) showed $493.57 million of and the KraneShares CSI China Internet ETF (KWEB) saw weekly inflows. net inflows of $116.40 million and $67.34 million, or 4.50% of its AUM, respectively. • Other notable asset gainers were the Materials Select • The Deutsche X-trackers Harvest CSI 300 China A-Shares Sector SPDR Fund (XLB) with $457.76 million of inflows, Fund (ASHR) also showed net inflows of $11.82 million representing 11.17% of its AUM; the SPDR Gold Trust over the same period. (GLD) with $439.66 million of inflows. • At the same time, the JP Morgan BetaBuilders Japan ETF • At the other end of the spectrum, the SPDR S&P 500 ETF (BBJP) continued to post weekly inflows of $125.47 Trust (IVV) faced the largest redemptions. IVV saw million, representing 5.67% of its AUM. The iShares MSCI $601.40 million worth of redemptions the past week. The Japan ETF (EWJ) attracted $80.64 million inflows, while small-cap iShares Russell 2000 ETF (IWM) showed net the Deutsche X-trackers MSCI Japan Hedged Equity Fund outflows of $455.96 million. The iShares Russell 1000 ETF (DBJP) recorded $11.82 million of inflows. (IWB) and the SPDR S&P Midcap 400 ETF Trust (MDY) saw $339.35 million and $328.67 million of net outflows • Other noteworthy asset gainers included the Vanguard each. FTSE Pacific ETF (VPL) with $6.89 million inflows; the iShares MSCI South Korea Capped ETF (EWY) with $5.81 • The Invesco S&P 500 Equal Weight ETF (RSP) registered million inflows; the iShares MSCI Indonesia ETF (EIDO) weekly outflows of $318.66 million. The Technology with $4.42 million inflows. Select Sector SPDR Fund (XLK) also saw net outflows of $294.48 million the past week. • At the other side of the ledger, the Wisdom Tree Japan Hedged Equity Fund (DXJ) continued to face the outflows • In the space of fixed income ETFs, the iShares Core U.S. of $172.36 million, while the iShares MSCI Hong Kong Aggregate Bond ETF (AGG) experienced net outflows of ETF (EWH) and the First Trust ISE Chindia Index Fund (FNI)

Page 14

Global ETF Strategy

Weekly Global ETF Commentary

posted weekly outflows of $20.99 million and $10.61 • As of the week ended November 1st, 2018, the U.S. ETF million each. The iShares MSCI India ETF (INDA) had $8.99 market had 2,210 ETPs from 131 fund sponsors and 159 million of outflows, and the iShares MSCI New Zealand index providers listed on 4 exchanges. The number of ETFs Capped ETF (ENZL) saw weekly outflows of $2.24 million has increased 4.2% YTD with 230 new funds launched the past week. and 142 delisted. Total ETF assets stood at $3,503.15 billion, which have risen by 3.3% YTD, an increase of $114.11 billion. Net inflows were $214.05 billion. The average daily trading volume has increased by 33.9% to $88.80 billion as compared to the same period last year.

Weekly Flows of Selected Asia Pacific ETFs Listed in U.S.*

Net Flows AUM %AUM %Weekly %Short Ticker Name ($mm) ($mm) Change Perform Interest FXI iShares China Large-Cap ETF 267.85 5,220.68 5.41% 3.33% 22.9% BBJP JPMorgan BetaBuilders Japan ETF 125.47 2,338.24 5.67% 0.13% 0.1% MCHI iShares MSCI China ETF 116.40 3,516.15 3.42% 4.77% N.A. EWJ iShares MSCI Japan ETF 80.54 16,789.24 0.48% 0.07% 8.0% KWEB KraneShares CSI China Internet ETF 67.34 1,562.83 4.50% 9.20% 7.5% ASHR Deutsche X-trackers Harvest CSI 300 China A-Shares 26.55 966.15 2.83% 2.29% 8.9% DBJP DeutscheFund X-trackers MSCI Japan Hedged Equity Fund 11.82 924.65 1.29% 0.35% 1.8% VPL Vanguard FTSE Pacific ETF 6.89 3,957.98 0.17% 0.97% 2.2% EWY iShares MSCI South Korea Capped ETF 5.81 3,413.43 0.17% 0.29% 9.7% EIDO iShares MSCI Indonesia ETF 4.42 358.51 1.25% 5.74% 14.4% ENZL iShares MSCI New Zealand Capped ETF -2.24 146.28 -1.51% 5.25% N.A. INDA iShares MSCI India ETF -8.99 4,275.20 -0.21% 5.15% 9.5% FNI First Trust ISE Chindia Index Fund -10.61 288.77 -3.54% 6.24% 2.1% EWH iShares MSCI Hong Kong ETF -20.99 2,293.58 -0.91% 1.29% 3.5% DXJ WisdomTree Japan Hedged Equity Fund -172.36 5,003.31 -3.33% 0.87% 1.9% Source: ETFAA, FactSet via ETF.com, XTF.com * Includes ETFs with AUM>$60 Million as of the week ended November 1, 2018

Flows of U.S.-Listed Asia Pacific ETFs by Country*(Net Flows, US$mm)

Source: ETFAA, FacSet via ETF.com, XTF.com * As of the week ended November 1, 2018

Page 15

Global ETF Strategy

Weekly Global ETF Commentary

Top 10 Weekly Inflows (All ETFs)*

Ticker Name Net Flows AUM %AUM %Weekly %Short ($mm) ($mm) Change Perform Interest BIL SPDR Bloomberg Barclays 1-3 Month T-Bill ETF 956.87 5,320.35 17.99% -0.12% 0.2% SHY iShares 1-3 Year Treasury Bond ETF 839.01 15,098.22 5.56% -0.12% N.A. IWD iShares Russell 1000 Value ETF 651.11 36,585.48 1.78% 1.84% 0.3% VTI Vanguard Total Stock Market ETF 553.26 99,721.25 0.55% 1.43% 0.3% IVV iShares Core S&P 500 ETF 549.02 158,362.35 0.35% 1.25% 0.3% MINT PIMCO Enhanced Short Maturity Active ETF 497.58 11,413.31 4.36% -0.17% 0.2% VOO Vanguard S&P 500 ETF 493.57 99,387.55 0.50% 1.30% 0.5% SHV iShares Short Treasury Bond ETF 463.70 15,635.85 2.97% -0.13% N.A. XLB Materials Select Sector SPDR Fund 457.76 4,098.80 11.17% 5.73% 19.6% GLD SPDR Gold Trust 439.66 29,709.15 1.48% 0.20% 5.9%

Source: ETFAA, FactSet via ETF.com, XTF.com * For the week ended November 1, 2018

Top 10 Weekly Outflows (All ETFs)*

AUM %AUM %Weekly %Short Ticker Name Fund ($mm) Change Perform Interest SPY SPDR S&P 500 ETF Trust -601.40 256,708.2 -0.23% 1.27% 19.0% IWM iShares Russell 2000 ETF -455.96 44,641.105 -1.02% 2.94% 24.1% AGG iShares Core U.S. Aggregate Bond ETF -376.88 52,577.99 -0.72% -0.31% 3.3% BKLN Invesco Senior Loan ETF -369.26 6,685.63 -5.52% -0.04% 9.4% IWB iShares Russell 1000 ETF -339.35 16,903.80 -2.01% 1.47% 2.7% MDY SPDR S&P Midcap 400 ETF Trust -328.67 18,393.06 -1.79% 2.55% 4.9% TIP iShares TIPS Bond ETF -327.34 22,223.15 -1.47% -0.30% 0.7% RSP Invesco S&P 500 Equal Weight ETF -318.66 14,631.64 -2.18% 2.44% 1.0% XLK Technology Select Sector SPDR Fund -294.48 19,678.72 -1.50% 0.91% 6.7% IEFA iShares Core MSCI EAFE ETF -294.47 55,065.61 -0.53% 2.34% 0.6%

Source: ETFAA, FactSet via ETF.com, XTF.com * For the week ended November 1, 2018

Weekly Flows By Asset Class*

Asset Class Net Flows AUM Total YTD ($mm) ($mm) % of AUM Flows ($mm) U.S. Equity 3,275.15 2,013,343.54 0.16% 95,290.22 International Equity -34.07 738,883.44 -0.00% 41,580.07 U.S. Fixed Income 2,455.83 561,226.06 0.44% 57,776.83 International Fixed Income 94.78 65,500.29 0.14% 10,281.41 Commodities 178.65 60,805.65 0.29% -283.37 Currency 33.28 1,133.98 2.93% -33.19 Leveraged 622.08 35,134.65 1.77% 6,561.42 Inverse -58.46 13,339.00 -0.44% 1,939.16 Asset Allocation -7.80 8,971.82 -0.09% 661.63 Alternatives 88.32 4,814.52 1.83% 273.81 Total: 6,647.76 3,503,152.93 0.19% 214,047.99

Source: ETFAA, FactSet via ETF.com, XTF.com * For the week ended November 1, 2018

Page 16

Global ETF Strategy

Weekly Global ETF Commentary

Cumulative Weekly ETF Flows By Asset Class*

Source: ETFAA, ETF.com, XTF.com; ETFdb.com * As of the week ended November 1, 2018

Weekly ETF Flows By Asset Class*

Source: ETFAA, FactSet via ETF.com, XTF.com; * As of the week ended November 1, 2018

Page 17

Global ETF Strategy

Weekly Global ETF Commentary

Comparison of YTD ETF Flows

Source: ETFAA, FactSet via ETF.com, XTF.com; * As of the week ended November 1, 2018

Page 18

Global ETF Strategy

Weekly Global ETF Commentary

Completed Date: 5 Nov 2018 12:22:06 (SGT) Dissemination Date: 5 Nov 2018 12:50:42 (SGT)

Sources for all charts and tables are DBS Bank unless otherwise specified

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

Page 19

Global ETF Strategy

Weekly Global ETF Commentary

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd., DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), or their subsidiaries and/or other affiliates have proprietary positions in Financial Select Sector SPDR Fund, Energy Select Sector SPDR Fund, SPDR S&P Metals and Mining, iShares Nasdaq Biotechnology, iShares China Large-Cap, iShares MSCI Brazil Capped, SPDR Gold Shares, United States Oil Fund LP, WisdomTree Japan Hedged Equity Fund, Technology Select Sector SPDR Fund, recommended in this report as of 2 Nov 2018.

2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services: 3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

Page 20 Global ETF Strategy

Weekly Global ETF Commentary

RESTRICTIONS ON DISTRIBUTION

General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at [email protected]

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

United Kingdom This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore.

This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6th Floor, Gate International Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Financial Centre Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

Page 21 Global ETF Strategy

Weekly Global ETF Commentary

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as Emirates defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Regional Research Offices HONG KONG MALAYSIA SINGAPORE DBS Bank (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd 11th Floor The Center Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 99 Queen’s Road Central 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, Central, Hong Kong Capital Square, Marina Bay Financial Centre Tower 3 Tel: 852 3668 4181 8 Jalan Munshi Abdullah 50100 Singapore 018982 Fax: 852 2521 1812 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 e-mail: [email protected] Tel.: 603 2604 3333 Fax: 65 65353 418 Fax: 603 2604 3921 e-mail: [email protected] e-mail: [email protected] Company Regn. No. 196800306E

INDONESIA THAILAND PT DBS Vickers Sekuritas (Indonesia) DBS Vickers Securities (Thailand) Co Ltd Contact: Maynard Priajaya Arif Contact: Chanpen Sirithanarattanakul DBS Bank Tower 989 Siam Piwat Tower Building, Ciputra World 1, 32/F 9th, 14th-15th Floor Jl. Prof. Dr. Satrio Kav. 3-5 Rama 1 Road, Pathumwan, Jakarta 12940, Indonesia Bangkok Thailand 10330 Tel: 62 21 3003 4900 Tel. 66 2 857 7831 Fax: 6221 3003 4943 Fax: 66 2 658 1269 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

Page 22