US ETF becomes substantial shareholder of SGX-listed small-cap; has stakes in 30 S'pore stocks

Straits Times

2 days ago

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AVDV ETF increased its stake in oil company Rex International to 5.3 per cent – or slightly over 69 million shares – on July 17 at $0.178 apiece.
SINGAPORE - A US-based exchange-traded fund (ETF) has recently become a substantial shareholder of a Singapore-listed small-cap company.
Avantis International Small Cap Value ETF (AVDV) increased its stake in oil company Rex International to 5.3 per cent – or slightly over 69 million shares – on July 17 at 17.8 cents apiece, according to a statement by the Singapore Exchange (SGX) on July 29.
This transaction crossed the threshold of 5 per cent that qualifies it as a substantial shareholder under Singapore law.
The fund is owned by American Century Investments, based in Kansas City, and focuses on a broad range of small-cap stocks listed in non-US developed markets, targeting those with low valuations and strong profitability.
Industrials, materials, financials and energy sector stocks make up the bulk of its portfolio.
Japan is the fund's largest market, while most of its other investments are in Europe and Australia.
The ETF's year-to-date return as at July 31 is 25.26 per cent, and it closed at US$80.31 on Aug 1.
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It was established in 2019 and has been investing in SGX-listed stocks since then.
American Century's investment in Rex International makes up 0.09 per cent of AVDV's assets under management, which are valued at close to US$11 billion (S$14.1 billion).
This is also the first time an ETF has become a substantial shareholder of an SGX-listed small-cap company, said Mr Geoff Howie, market strategist at SGX.
Small-cap stocks are valued at under $1 billion, while large-cap stocks are over $5 billion and mid-cap stocks are valued in between.
'Outside of large-cap stocks, we had not seen an ETF provider emerge as a substantial shareholder,' said Mr Howie.
He added that no ETF has made similar investments to become a substantial shareholder in small-cap companies listed on other regional exchanges.
Therefore, American Century's investment could spell a new positive trend for small-cap companies in Singapore, he noted.
He said: 'Small-cap stocks could emerge as a new sector for investments, especially with more companies looking to capitalise on Singapore's reputation as a good place for doing business.
'There is a lot of potential for liquidity to come into the small and mid-cap sectors.'
This would also bode well for the Monetary Authority of Singapore's Equity Market Development Programme (EQDP), aimed at boosting SGX-listed stocks and revitalising Singapore's stock market.
Mr Vasu Menon, managing director of investment strategy at OCBC Bank, said American Century's investment in SGX-listed small-cap stocks is testament to the confidence that global institutional investors have in the EQDP.
'It is also a recognition that undiscovered gems can be found among small and mid-cap stocks here which have underperformed against large-cap stocks.'
He added that AVDV's move would help to raise the profile of small-cap stocks and generate interest from other US and global institutional funds, which should augur well for such companies listed here.
Mr Matthias Chan, head of equities research at SAC Capital, said: 'If more foreign-based ETFs are drawn to Singapore equities, it will more than likely target the small to mid-cap space, and for good reason.
'Although the FTSE ST Small Cap Index may have recovered over the past year in line with the market, it is still down 11 per cent over the past three years and 7 per cent over the past five years, suggesting further meaningful upside.'
AVDV is currently invested in 30 stocks listed on SGX, which delivered a 42 per cent total return on average, according to SGX.
Twenty-two of these stocks delivered a higher average daily turnover of $52.9 million to date in 2025 , compared with $29.3 million for the whole of 2024.
The portfolio comprises a mix of Singapore and foreign companies, many of which are in the energy and industrials sectors.
Mr Howie said that AVDV's investment in foreign companies listed on SGX is testament to Singapore's advantage as a financial centre in the region with a strong currency.
'If these companies were listed in emerging Asian markets instead, they would not be part of this ETF.'
Chinese investment holding firm Yangzijiang Financial Holding – the financial arm of a Chinese shipbuilding company – which has a market cap of $3.27 billion, is the ETF's largest exposure to SGX stocks.
It holds 89.6 million shares, or a 2.6 per cent interest, in the company, comprising 0.61 per cent of its stock weight.
This investment is also the fund's ninth largest in its entire portfolio.
Other SGX-listed stocks in the ETF's portfolio include Indonesian palm oil producer First Resources, with a 1 per cent stake or 15.5 million shares; Indonesian shipping company Samudera Shipping Line, with a 2.5 per cent stake or 13.5 million shares; and Hong Kong port operator Hutchison Port Holdings Trust, with a 0.6 per cent stake or 52 million shares.
The portfolio also includes a number of Singapore companies, including construction company Wee Hur Holdings, with a 2.3 per cent stake or 21.4 million shares; industrial systems company CSE Global, with a 0.8 per cent stake or 5.7 million shares; and Keppel Infrastructure Trust, with a 0.1 per cent stake or 6.9 million shares.
Other Singapore companies include The Hour Glass, Raffles Medical Group and Food Empire Holdings.