Stock analysis/investing
STI ETF: Historical Returns, Dividends, Investment Prospects in 2022
10 May 2022
What is STI ETF?
STI ETF or Straits Times Index is the index of the top 30 companies listed in SGX/Singapore’s Stock Exchange. It is a widely followed ETF in Singapore.
ES3.SI is the ticker for the SPDR Straits Times Index ETF.
ETF is an exchange traded fund.
In summary, an ETF can be bought and sold like a stock and there are no requirements to invest in ETF through a financial advisor. We simply need a stock brokerage account.
ETF is traded during market hours, just like stocks.
ETF is usually more passive as it focuses on simply replicating the shares determined by the index, in this case the Strait Times Index.
STI ETF is popular in Singapore because it is an index consists of the top 30 companies in Singapore, and therefore, it is more diversified as opposed to investing in just 1 stock.
If you invest in just 1 stock and that companies goes bankrupt, you will lose 100% of your money, but if one of the 30 companies in the STI ETF goes bankrupt, the STI ETF will not lose 100% in value as it is merely 1 of the 30 companies. And another company will eventually replace that bankrupt company to be included in the 30 companies under STI ETF.
STI ETF is generally a proxy for the Singapore stock market. When the news report that Singapore stock market is up or down today, they are generally referring to the STI ETF.
History of the STI ETF
Strait Times Index dated back to 31 August 1998.
It was invented by SGX, Singapore Press Holdings (SPH) and a professor from the National University of Singapore.
In 2008, the STI is amended so that the the companies inside the STI are reviewed every three months, based on the capitalization-weighted approach.
The capitalization-weighted approach simply means that the top 30 companies with the highest market value (number of shares times stock price) are selected into the STI ETF.
STI ETF Constituent as of 10 May 2022
- Comfort Delgro Corporation (SGX: C52)
- Venture Corporation LImited (SGX: V03)
- DBS (SGX: D05)
- OCBC (SGX: O39)
- Singtel (SGX: Z74)
- UOB (SGX: U11)
- Keppel Corp (SGX: BN4)
- Wilmar (SGX: F34)
- Mapletree Industrial (SGX: ME8U)
- Yangzijiang Shipbldg (SGX: BS6)
- Mapletree Commercial (SGX: N2IU)
- Thai Beverage (SGX: Y92)
- Capitaland Integrated comm (SGX: C38U)
- City Developments Limited (SGX: C09)
- Sembcorp Industries (SGX: U96)
- Ascendas REIT (SGX: A17U)
- SATS Ltd (SGX: S58)
- UOL Group (SGX: U14)
- Capitaland Investment (SGX: 9CI)
- Keppel DC REIT (SGX: AJBU)
- Genting Singapore (SGX: G13)
- Singapore Tech Engineering (SGX: S63)
- Mapletree Logistic (SGX: M44U)
- Frasers Logistics & Commercial Trust (SGX: BUOU)
- Singapore Exchange Limited (SGX: S68)
- Dairy Farm (SGX: D01)
- Singapore Airlines (SGX: C6L)
- Hongkong Land (SGX: H78)
- Jardine Cycle & Carriage (SGX: C07)
- Jardine Matheson Holdings (SGX: J36)
The Size of the STI ETF
In total, the market capitalization of all these 30 companies is around $515.9B.
And as you can see, that is still less than the market value of a single stock in the US, such as Meta Platforms Inc (NASDAQ: FB). Which as of 10 May 2022 is at a market cap of $531.01B.
This goes to show that the Singapore market is generally much smaller than the US stock market and the companies inside it.
Historical Returns of STI ETF
Historically, in terms of dividends, the STI ETF pays around 3% per year. And in Singapore, dividends are not taxed.
Source: Yahoo Finance as of 10 May 2022
As you can see, in terms of historical returns, the STI ETF have not fared very well. They are at about 4.29% annually over the last 10 years, 6.59% over the last 5 years and 2.90% over the last 3 years.
Source: Yahoo Finance as of 5 May 2022
In comparison with the SPY (S&P 500 ETF), which have fared much better. They are at about 14.24% annually over the last 10 years,15.15% over the last 5 years and 15.29% over the last 3 years.
Investment Prospects of STI ETF
The future of the STI ETF will depend pretty much on the performance of the top 30 companies in the Singapore market.
As most of the companies in the STI ETF is not the kind of global-growth companies we normally see in the US (the likes of Apple, Google etc), it is hard to expect impressive returns over the long run as the STI ETF constituents TAM (total addressable market) is not as big as say the S&P 500.
Having said that, the STI ETF might not be as volatile as say the SPY or the QQQ (Nasdaq tech focused ETF). And in the current volatile macroeconomic climate we are in, with rising interest rates, the STI ETF will likely, in my view not be as volatile as the US market in 2022.
In Conclusion
The STI ETF might be suitable for people who are lazy to learn and pick their own stocks.
Because stock picking requires time and requires interest + effort.
But if one is comfortable or satisfied with the Singapore market and it’s historical 3-4% annual growth, the STI ETF might be an option.
The STI ETF or ETF in general is for the passive investors who simply want to get the market return.
If you are looking for higher returns through really learning deeply so you can pick your own stocks,
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Disclaimer:
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Chris Lee Susanto
Full-time investor, speaker, and editor of the investment blog Re-ThinkWealth.com and Founder at Value Investing Mentorship.
Chris started investing in stocks early at age 21 and is a big proponent of business-like stock investing – a mixture of both value and growth investing. He invests in companies where there is value to be found (as long as it is still within his circle of competence), be it a turnaround, depressed, value, or quality growth company (compounders). He either buys the stock outright or he profits through selling put or selling call options – or buying call options (buying and selling options are especially dangerous for those who do not know how to properly execute it).
Some of the places where Chris has been invited to speak or have added value as a mentor or writer includes Singapore Polytechnic, SMU Institute of Innovation and Entrepreneurship (IIE), Dollars and Sense, The New Savvy, Value Walk Blog, Investment Moats, NUS Tembusu College, NUS Investment Society, CGS-CIMB Singapore, Singapore Financial Conference by NTU IIC, The Financial Coconut Podcast, Money FM 89.3 and Internationally in Myanmar.
He is also a practitioner of Transcendental Meditation and Mindfulness practice. He also advocates regular exercise, enough sleep, and nutritious food as part of our lifestyle as an investor so that we can see things with a clearer lens and not be “caught” due to ignorance.
As of the time of this writing, Chris is focusing on setting up his MAS Licensed Fund with the goal to beat the market over the long run.
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