Broker: DBS Private Bank Research Date of Report: March 2025
“Diversifying Investment Offerings with Singapore Depository Receipts”
Tapping into Asia’s Growth Potential with Singapore Depository Receipts
Introduction Singapore Exchange (SGX) offers a diverse range of investment products, including Commodities, Equity Derivatives, Fixed Income, FX, Indices, and Securities. One of the innovative offerings on SGX is Singapore Depository Receipts (SDRs), which provide investors with a convenient way to gain exposure to overseas-listed companies.
SDRs: A Gateway to Global Diversification
Convenience and Cost-Efficiency
SDRs offer several advantages for investors: • Traded, settled, and dividends paid in Singapore dollars, eliminating foreign exchange fees • Accessible during SGX trading hours, avoiding the need to trade directly on overseas exchanges • Lower brokerage fees compared to direct overseas trading • No custody charges for holding SDRs in Central Depository (CDP) accounts
Capturing Asian Diversification
SDRs provide investors with exposure to a wide range of companies and sectors across Asia, including: • China’s technology giants like Tencent, Alibaba, and Xiaomi • Leading electric vehicle manufacturer BYD • Integrated financial and healthcare service provider Ping An Insurance • Global banking powerhouse HSBC • China’s state-owned commercial bank Bank of China
Tencent: China’s Social Media Juggernaut
• Tencent (HTCD) is China’s leading social media provider, capturing 90% of the country’s population through platforms like WeChat. • Q3 FY4 net profit surged 47%, driven by broad-based growth across domestic and international gaming, as well as marketing services. • Potential acceleration of online games revenue from overseas markets and leveraging WeChat’s large user base to boost monetization opportunities. • Trading at a P/E of 24.3x, the stock has delivered 20.5% YTD returns, outperforming peers.
Alibaba: Dominant E-commerce Platform
• Alibaba (HBBD) is the largest e-commerce platform in China, with a 42% market share by Gross Merchandise Volume and over 800 million monthly active users. • 3Q FY24 revenue grew 5% across all business lines, with the Cloud Intelligence segment seeing a 7% increase driven by double-digit public cloud growth. • Alibaba’s focus on Artificial General Intelligence is expected to act as a catalyst for further growth in the next 3 years. • The stock has rallied 60.2% YTD, trading at a P/E of 21.4x.
Xiaomi: Global Smartphone Leader
• Xiaomi (HXXD) is the world’s 3rd largest smartphone vendor, with a strong presence in 52 markets globally. • YTD FY24 adjusted net profit surged 50% from stronger-than-expected smartphone shipments and sustainable growth in tablets and appliances. • The company’s EV momentum, with total EV deliveries expected to exceed 130K, and continued growth in its IoT business are key drivers. • Trading at a P/E of 52.8x, Xiaomi has delivered 46.1% YTD returns, outperforming major peers.
Ping An Insurance: Integrated Financial Services
• Ping An Insurance (HPAD) is a leading integrated financial, healthcare, and elderly care service provider in China. • YTD FY24 net profit surged 36% as operating profit across its three core business lines (Life and Health Insurance, Property and Casualty Insurance, and Banking) grew 5.7%. • The company’s health and senior care service offerings act as new drivers of value growth, with nearly 63% of its 240 million retail customers cross-sold across its core businesses. • Trading at a P/B of 0.9x and offering a dividend yield of 5.7%, Ping An outperforms its peers.
HSBC: Global Banking Powerhouse
• HSBC (HSHD) is a global bank that serves as a key connector between the East and West. • 3Q FY24 revenue grew 5%, reflecting higher customer activity in Wealth products and stronger performance in Foreign Exchange, Equities, and Global Debt Markets. • Diversified revenue streams, with non-Net Interest Income accounting for over 60% of revenue growth in FY23, and geographical diversification with 45% of revenues derived from Asia. • Offering a dividend yield of 7.6%, HSBC trades at a P/B of 1.2x.
Bank of China: Resilient State-Owned Bank
• Bank of China (HBND) is a state-owned commercial bank with geographical diversification that helps mitigate risks. • YTD revenue and net profit beat market expectations, driven by growth in non-Net Interest Income (+50%) and the bank’s resilient net margins at 43%. • Geographical diversification, with 19% of assets valued in foreign currencies, has supported a lower-than-peer drop in net interest margins amid lower domestic rates. • Offering a dividend yield of 8.9%, Bank of China trades at a P/B of 0.5x.
Conclusion Singapore Depository Receipts provide investors with a convenient and cost-effective way to gain exposure to a diverse range of companies across Asia. By tapping into the growth potential of sectors such as technology, electric vehicles, and financial services, SDRs offer a compelling option for investors seeking to diversify their portfolios and capture the dynamism of the Asian markets.
