US-based ETF Becomes Substantial Shareholder of S'pore-listed Small-Cap Firm

Fund's Investment Could Spell Positive Trend for Small Caps on SGX, Says Analyst

- Benjamin Lim

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.

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.