EQ8SID 1H 2025 Report: Navigating ASEAN Market Headwinds
For investors keeping a close eye on Southeast Asia, the first half of 2025 has been a period of significant volatility. Amidst global trade tensions and mixed economic signals, how did dividend-focused funds perform? Today, we’re diving deep into the semi-annual report for the EQ8 MSCI SEA Islamic Dividend ETF (EQ8SID), covering the period from January 1 to June 30, 2025.
This Shariah-compliant ETF, designed to track high dividend-yielding companies across ASEAN, offers a compelling story of resilience. While its overall value dipped in line with regional markets, the fund managed to outperform its price benchmark, showcasing some defensive strength. Let’s break down the key numbers and strategic shifts that defined its performance.
Core Data Highlights
A Challenging Half-Year Performance
The first six months of 2025 saw ASEAN markets underperform, largely driven by external uncertainties like US tariff policies. This was reflected in EQ8SID’s performance, although it managed to weather the storm better than its underlying index in price terms.
The fund’s Net Asset Value (NAV) per unit saw a decrease of -3.84%, closing at RM0.7111 on June 30, 2025. While a decline, this was notably better than its benchmark price index (MIISOD40 Index), which fell by 5.50% over the same period. However, when accounting for dividends (total return), the fund’s return was -3.84%, lagging the benchmark’s total return of -2.25%, primarily due to fund expenses.
Asset Allocation: A Shift Towards Caution
A look at the fund’s asset allocation compared to the same period last year reveals a subtle but strategic shift. The manager has slightly increased the fund’s cash position, suggesting a move to build liquidity and maintain a cautious stance in a volatile market.
As at 30 June 2025
- Listed Shariah-compliant equity securities: 92.8%
- Listed Shariah-compliant collective investment schemes: 4.4%
- Short term Islamic deposits and cash equivalents: 2.8%
As at 30 June 2024
- Listed Shariah-compliant equity securities: 94.3%
- Listed Shariah-compliant collective investment schemes: 4.5%
- Short term Islamic deposits and cash equivalents: 1.2%
Portfolio Deep Dive: Sector and Country Adjustments
In response to quarterly index rebalancing by MSCI, the fund’s composition underwent notable changes. There was a clear pivot towards more defensive sectors, while country exposure was also adjusted to align with the benchmark.
Sector Allocation Changes (vs. 31 Dec 2024)
| Sector | 30 Jun 2025 (%) | 31 Dec 2024 (%) | Change (%) |
|---|---|---|---|
| Consumer Staples | 19.5 | 12.0 | +7.5 |
| Energy | 17.8 | 18.2 | -0.4 |
| Utilities | 15.8 | 17.1 | -1.3 |
| Telecommunication Services | 13.2 | 17.8 | -4.6 |
| Industrials | 5.0 | 10.3 | -5.3 |
The most significant change was a 7.5% increase in allocation to Consumer Staples, a classic defensive move during uncertain economic times. Conversely, exposure to more cyclical sectors like Industrials and Telecommunication Services was reduced.
Country Exposure Changes (vs. 31 Dec 2024)
| Country | 30 Jun 2025 (%) | 31 Dec 2024 (%) | Change (%) |
|---|---|---|---|
| Malaysia | 33.9 | 37.2 | -3.3 |
| Indonesia | 25.0 | 19.7 | +5.3 |
| Thailand | 21.3 | 24.4 | -3.1 |
| Singapore | 10.6 | 10.6 | 0.0 |
| Philippines | 9.2 | 8.1 | +1.1 |
Geographically, the fund significantly increased its weighting in Indonesia by 5.3% while trimming its exposure to Malaysia and Thailand. This reflects the changing dynamics within the ASEAN region as captured by the benchmark index.
Risk and Prospect Analysis
Market Outlook: Caution Remains the Word
The report highlights that ongoing tariff negotiations and global trade tensions are expected to continue weighing on international trade and economic growth. This uncertainty creates a challenging environment for ASEAN’s export-oriented economies.
While these external factors pose downside risks to GDP growth and corporate earnings, the report suggests that domestically focused sectors are likely to remain relatively resilient. This outlook aligns with the fund’s increased allocation to Consumer Staples, which typically rely on local consumption.
Potential Risks on the Horizon
Investors should be mindful of several key risks outlined in the report:
- Market Risk: The ASEAN region’s underperformance compared to global equities could persist, influenced by geopolitical events and trade policy shifts. Countries like Thailand and Malaysia have seen significant YTD declines, impacting the fund’s overall value.
- Currency Risk: As the ETF holds assets across multiple countries, fluctuations in currencies like the Indonesian Rupiah, Thai Baht, and Philippine Peso against the Malaysian Ringgit can affect returns.
- Sector Vulnerability: Export-oriented sectors, which are a part of the ASEAN economy, are particularly vulnerable to US tariffs and any resulting slowdown in global demand.
Summary and Investment Recommendations
The first half of 2025 was a test of resilience for the EQ8SID ETF. While the fund’s value declined amidst broader market weakness, its ability to outperform its price benchmark is a positive sign. The strategic rebalancing towards defensive consumer staples and an increased focus on Indonesia reflects a fund that is actively adapting to a challenging macroeconomic landscape. Looking ahead, the fund’s performance will likely be shaped by the outcome of global trade negotiations and the strength of domestic consumption within the ASEAN region.
Key risks for investors to monitor include:
- Persistent Global Trade Uncertainty: The ongoing tariff situation remains the primary headwind, with the potential to dampen economic growth and corporate earnings across Southeast Asia.
- ASEAN Market Divergence: The region’s continued underperformance relative to other global markets could weigh on the fund’s NAV.
- Foreign Exchange Fluctuations: As a multi-country fund, currency volatility is an inherent risk that can impact the final returns for Malaysian investors.
Final Thoughts
From a professional viewpoint, this report illustrates an ETF navigating a complex environment with methodical adjustments. The outperformance against its price benchmark is commendable, and the portfolio shifts appear aligned with a cautious, defensive strategy. However, the lag in total return performance underscores the importance of considering the Total Expense Ratio (TER), which was reported at an annualized 1.77% for the period, when evaluating any ETF investment.
What are your thoughts on the ASEAN market for the rest of the year? Do you think the fund’s pivot to consumer staples and Indonesia will pay off? Share your insights in the comments below!
