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STI 30 – Singapore Stock Exchange – Does a great country also mean a great index? [Guide]
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STI 30 – Singapore Stock Exchange – Does a great country also mean a great index? [Guide]

created Forex Club10 May 2024

Singapore is a country that has undergone enormous economic transformation over the last few decades. This poor port became one of the largest financial centers in Asia in a few decades. Interestingly, the country did this thanks to the free market reforms it introduced Lee Kuan Yew. Singapore itself was a British colony for several decades. Initially, it was a trading port, which over time, thanks to its strategic location, became an important base for the British fleet operating in the Far East. At that time, the British were developing Hong Kong more economically. However, it is worth noting that thanks to the British legal and administrative system, institutions began to be created that helped to exploit Singapore's potential in the future.

Transformation from a mere port to one at the center of Asia

The Lion City itself (as this city-state is sometimes called) gained independence in 1965. The country then had huge problems with poverty, illiteracy and lack of cleanliness. However, thanks to efficient management, corruption and drug trafficking were ended and infrastructure in the country began to be improved. Lee Kuan Yew was aware that Singapore needed to integrate economically with the developed "Western" countries. However, integration did not mean abandoning the so-called “Asian values”. The focus was on financial markets and facilities for foreign investors. Thanks to this, the country has become one of the main gateways to Asian markets. Although Singapore was formally a parliamentary republic, power was controlled by Lee and his political forces. But that didn't make him become one "eastern despoty". On the contrary. Thanks to the long-term vision and iron discipline of the authorities, the country managed to achieve a huge transformation. Initially, it was a transshipment port, which allowed Singapore to be made a place where “East meets West”. Over time, the need to finance commercial and production activities developed. There were many Chinese and Thais living in the country who knew both English and their native languages. It became natural that both Asian company headquarters and branches of international banks began to open here. Investments were attracted by predictable law and low taxes. Of course, there were more factors that caused this development. Nevertheless, the country has changed beyond recognition.

Now Singapore is a clean place that attracts many economic emigrants. Nowadays, it is not only a financial center, but also home to some of the best universities in the world. Famous universities include: National University of Singapore or Nanyang, SMU (Singapore Management University). The country also cares about the environment and the comfort of its citizens. Currently, one third of the city is green areas (including parks). The development in recent decades has been stunning. Suffice it to mention that Singapore in the 60s had problems with garbage, sewage and disorderly city architecture.

Singapore is one of the main financial centers of Asia

It may seem strange to some people, but Singapore has been one of the main Asian financial centers for decades. There was talk of the big three, i.e. stock exchanges in... Singapore, Hong Kong i Tokyo. Suffice it to say that in the 90s Nick Lesson, who worked in the Singapore branch of Barings Bank, led to losses of several hundred million pounds through unsuccessful speculation on futures contracts.

With the development of capital markets in China and South Korea, Singapore's position has significantly decreased. But still The Singapore Stock Exchange is the second largest in the ASEAN region (in Indonesian). The operator of the stock exchange is the company SGX Group (Singapore Exchange Limited), which is also listed on the trading floor. SGX itself allows exchange participants to trade shares, bonds, currencies, commodities and derivatives on indices. The stock exchange was established as a result of the merger Stock Exchange of Singapore (SES) and Singapore International Monetary Exchange (SIMEX). In addition, SCCS has also joined the exchanges, i.e Securities Clearing and Computer Services Pte. Thanks to this, SGX also has a clearing activity, which allows it to generate an additional source of income. Just one year after its establishment, the company debuted on the stock exchange. It was the third consecutive stock exchange from the Asia-Pacific region to debut on the trading floor. Previously, these were the Australian Securities Exchange and the Hong Kong Stock Exchange.

The mentioned stock exchange had a plan to take over smaller competitors (a dozen or so years ago, SGX was planning to take over the Australian stock exchange). Ultimately, among others Due to a conflict in the shareholding structure, the Tokyo Stock Exchange, which was one of the largest shareholders, did not agree to the takeover. It is worth noting that the Singapore Stock Exchange wanted to be taken over by the London Stock Exchange, but the plans fell through. Currently, SGX is one of the leading ASEAN exchanges. It is therefore worth taking a look at the most important index of the Singapore Stock Exchange - STI 30.

What is the STI 30 index?

STI is an abbreviation of Straits Times Index, which consists of the 30 largest and most liquid companies listed on the Singapore Stock Exchange. The index itself is calculated by a subsidiary of SGX and the FTSE Group. The partnership between SGX and FTSE began in 2008.

The history of the index is very long, dating back to 1966, but trading in the index began on August 31, 1988. On that day, the index replaced the previous product, STII (Straits Times Industrials Index). The reason for the change was simple, along with the change in the business model, the activities of production companies were decreasing. For this reason, it was necessary to add new sectors to the index and change the method of its calculation.

The index itself is dominated by companies from the banking sector. This can be seen in the table below, where the three largest components of the index are companies from the financial sector. The three companies mentioned have approximately 46% of the company's shares.

Company %
DBS-Group 20,0%
Oversea-Chinese Banking 15,1%
United Overseas Bank 11,4%
Singapore Telecommunications 6,1%
CapitaLand Ascendas REIT 3,6%

Source: own study

DBS-Group

Development Bank of Singapore, also known as DBS Bank Limited, is a Singaporean bank whose headquarters is, of course, in Singapore. It is one of the so-called "Big Three" banks, which include OCBC Bank (Oversea-Chinese Banking Corporation) and UOB Bank (United Overseas Bank). DBS itself is the largest bank in Southeast Asia by assets. Its assets under management exceeded $2023 billion at the end of 730. It is a universal bank that has both banking and investment activities. The bank focuses on development in the largest and most promising Asian markets, including: China, Taiwan, Indonesia and Hong Kong. The bank was established in 1968 by the Singaporean government. The institution was established to finance the Economic Development Board (EDB), i.e., among others, industrialization of the country and urban reconstruction.

Do5

Source: TradingView

Oversea-Chinese Banking

Oversea – Chinese Banking Corporation (OCBC) is one of the oldest banks in this part of Asia. The bank itself was established in 1932 as a result of the merger of three institutions (Chinese Commercial Bank Limited, Ho Hong Bank Limited and Oversea-Chunese Bank Limited). Currently, the bank has assets of over 500 billion Singapore dollars. Interestingly, the bank is considered one of the safest banks in Asia. This was the opinion of Global Finance, Global Finance Magazine and The Asian Banker. Interestingly, for many years the bank was the largest financial institution in Singapore. In the early 70s, it was the first Singaporean bank with assets exceeding USD 1 billion Singapore. However, with the acceleration of globalization and Singapore's opening to external capital, the bank has lost its lead. Despite this, it still belongs to the so-called "Big Three" of the Singapore financial market.

OCBC extension

Source: TradingView

United Overseas Bank

This is a bank that was established during Great Depression. In 1935, a group of businessmen founded the United Chinese Bank (UCB), which was intended to support local entrepreneurs, who were of Hokkien Chinese origin. Initially, the bank provided short-term liquidity loans to help Chinese companies survive the difficult economic slowdown. However, over time, the bank began to expand its service offer. Credit and deposit activities for individual clients as well as private banking and asset management services have appeared. Interestingly, the bank changed its name in 1965 to United Overseas Bank so as not to be confused with Hong Kong's United Chinese Bank. 5 years later, UOB bank debuted on the Joint Stock Exchange of Singapore. It is worth mentioning that at that time there was a connection between the Singapore and Malaysian stock exchanges, so the debut was simultaneous on two markets. In the following years, the process of geographical expansion continued. In 2002, the bank began operations in mainland China. However, the bank did not gain a dominant position there. In 2022, UOB acquired the individual banking business in Indonesia, Malaysia, Thailand and Vietnam for 5 billion Singapore dollars.

OuB

Source: TradingView

How to invest in the Singapore index?

One possible way is to buy ETF giving exposure to the Singapore index. An example is the iShares MSCI Singapore ETF, which is listed on the American stock exchange. The benchmark for the index is MSCI Singapore, which gives exposure to over 20 of the largest and most liquid companies listed on the Singapore Stock Exchange. The ETF itself is expensive, with an annual management fee of around 0,5%. The rate of return on this product is also impressive, as over the last 10 years the average annual rate of return on investment was +0,6%. Despite this poor rate of return, the ETF has now accumulated over $420 million in assets under management. The three largest components of the ETF are, of course, the banking "Big Three", which we mentioned earlier in the article.

Unfortunately, the STI 30 index is practically absent from the offers of popular Forex brokers, so it is difficult to gain exposure to this market through CFDs.

Brokers offering stocks and ETFs

How to invest in instruments with exposure to Singapore? As we mentioned, you can purchase shares of companies listed in the STI 30 index or purchase an ETF. An increasing number of forex brokers have quite a rich offer of stocks, ETFs and CFDs for these instruments. For example on XTB Today, we can find over 3500 companies and 400 ETFs, a Saxo Bank as many as 19 shares and approximately 000 ETFs.

Broker xtb 2 saxo bank logo small etoro
Country Poland Denmark Cyprus
Number of exchanges on offer 16 exchanges 37 exchanges 21 exchanges
Number of shares in the offer approx. 3500 - shares
approx. 2000 - CFDs on stocks
19 - shares
8 - CFDs on stocks
3 - shares
The amount of ETF on offer approx. 400 - ETF
approx. 170 - CFDs on ETFs
3000 - ETF
675 - ETF CFDs
323 - ETF
Commission 0% commission up to EUR 100 turnover / month according to the price list 0% commission*
Min. Deposit PLN 0
(recommended min. PLN 2000 or USD 500, EUR)
PLN 0 / EUR 0 / USD 0 100 USD
Tool xStation SaxoTrader Pro
Saxo Trader Go
EToro platform

*Zero commission means no brokerage/transaction fee was charged during the activity. However, they may still incur general fees, such as currency conversion fees for deposits and effects in non-USD currencies, fees for fees, and (if applicable) inactivity fees. Market spread also applies, although this is not a "fee" charged by eToro.

76% of retail investor accounts lose money when trading CFDs with this provider. Consider whether you can afford the high risk of losing your money.

Summary: interesting country, uninteresting index

Singapore is certainly one of the best places to live. Unfortunately, when looking for a place for passive investment on the stock market, this market is no longer so interesting. The most important index is dominated by banks, there are no large companies taking advantage of the digitization of the economy (although there are exceptions, such as: sea ​​ltd). It is therefore not surprising that the rates of return on this index are not stunning. Singaporean companies must be export-oriented because the domestic market is not receptive enough. Fortunately, the country's economic situation is favorable because Singapore is close to, for example, dynamically developing Indonesia.

This article is for information only. It is not a recommendation and is not intended to encourage anyone to undertake any investment activities. Remember that every investment is risky. Do not invest money you cannot afford to lose.
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