ETF Singapore Market

Emperador’s Addition Highlights Straits Times Index (STI) Flaws

Calvin Lo

If you thought that the Singapore Straits Times Index (STI) represented the top Singapore companies, news of Emperador’s addition here might have caught you by surprise. Emperador (SGX:EMI) is a Philippines-based whisky maker, the country’s biggest. Singapore’s ComfortDelgro (SGX:C52) had to make way for it in the STI.

Emperador is not the only non-Singapore company in the STI though. Other foreign companies already included in STI are Jardine Matheson (SGX:J36), DFI Retail Group (SGX:D01) and Hong Kong Land (SGX:H78) from Hong Kong, ThaiBev (SGX:Y92) from Thailand, and Yangzijiang (SGX:BS6) from China. Excluding Emperador, these foreign companies make up as much as 8% of the STI. See snapshot below as of 30 June 2022, before inclusion of Emperador.

Source: FTSE Russell

According to the STI factsheet on FTSE Russell website here, the STI tracks the performance of the top 30 largest and most liquid companies listed on the Singapore Exchange (SGX). That’s why foreign companies can be included in the STI as long as they are listed on SGX (primary or secondary listing) and meet the qualifying criteria set by FTSE.

Source: FTSE Russell

Personally, I see this as a big flaw in the STI. By investing in the STI, I would like to gain exposure to Singapore’s top companies, not foreign companies that may not even be the biggest ones in their respective markets. There’s also not much control of which foreign companies are included, it just depends on which ones choose to list in Singapore. That would also depend on SGX’s ability to attract foreign companies to list in Singapore.

If you don’t mind gaining a little bit of exposure to other parts of Southeast Asia and China, then STI might still work for you. But just be aware of the additional exposure you’re getting. For me, if I wanted exposure to SE Asia, I would rather invest in a SE Asia focused fund where I can get exposure to the largest companies in SE Asia. Likewise for China.

Don’t get me wrong, I’m not saying gaining exposure to STI (e.g. via an STI ETF) is not a good idea. It could fit your investment idea, but just be aware of what you’re being exposed to. That said, exposure to foreign companies only at 8% (might increase to ~9% with Emperador), which is not large.

For me, if I wanted to get pure exposure to Singapore equities, I might be better served by the iShares MSCI Singapore ETF (NYSE:EWS). Another option with less exposure to foreign companies is the Philip SING Income ETF (SGX:OVQ).

What do you think about STI as an investment?

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Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

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