By Yang Huiwen

A MORE affordable exchange traded fund (ETF) tracking the performance of the benchmark Straits Times Index (STI) will be launched later this month.

It will be the second such fund to solely track the STI after the streetTracks Straits Times Index Fund.

The DBS Singapore STI ETF, developed by DBS Asset Management (DBSAM), will list on Feb 25 and is the first in a series of new ETFs planned by DBS.

This ETF trades in a smaller lot size of 100 units compared with streetTrack's 1,000 units, making it more affordable for the retail investor.

The ETF invests in the STI component stocks in proportion to their respective index weights. Investors will get exposure to all the 30 component stocks that make up the main benchmark, generally making it a good diversification tool in a portfolio.

'It is in challenging times like these that investors should focus their attention on the true nature of long-term wealth management,' said Ms Deborah Ho, chief executive of DBSAM.

Ms Ho added that ETFs provide 'low-cost, effective and liquid access to opportunities for compounding growth in investments'.

This ETF will appeal to investors with a medium- to long-term investment horizon, she said.

These instruments have no sales fee and generally charge management fees of less than 1 per cent, making it a relatively low-cost investment.

A memorandum of understanding was signed between DBS and the Singapore Exchange (SGX) to work towards developing a variety of ETFs tailored to the local market.

These will include ETFs on the FTSE ST Index Series, as well as those that are suitable for retirement or regular savings, said SGX's executive vice-president and head of market development, Mr Chew Sutat.

Investors can apply for the shares through any DBS or POSB ATM from Feb 12 to 18. There will be a $2 subscription fee. The shares can later be traded through the investors' brokers.

SGX is also stepping up efforts to develop the ETF market and plans to launch an inverse ETF by around June this year, Mr Chew told reporters yesterday.

An inverse ETF works in the opposite way from a typical ETF by allowing investors to capitalise on a bear market and reap profits when things are going down.

The DBS Singapore STI ETF will be the 25th such fund to list on the SGX. Other ETFs cover Asian equity markets, as well as commodities and gold.

Investors can obtain more information on this new ETF at www.dbsam.com or by calling 1800-535-8025.

This article was first published in The Straits Times on February 06, 2009.