Best brokers for trading Singapore FTSE Straits Times Index (STI)

What is the FTSE Straits Times Index?

The Singapore FTSE Straits Times Index is the benchmark index of the Singapore stock market. This index has 30 component stocks, just like the DAX or Dow.

The Straits Times Index has had a few changes throughout its history. In 2008, the S'pore Press Holdings (SPH), S'pore Exchange (SGX) and the FTSE Group partnered together into delivering new equity indices to cover the local market. The STI index is renamed FTSE Straits Times Index.

Like the HK market, the predominant sectors of the STI are finance and property. There are several REITs (Real Estate Investment Trusts) included in the index too.

According to the SGX/FTSE websites, the top three weightings of the index come from DBS, OCBC, and UOB - all Singapore-based banks. A full list of the component stocks is tabled below.

FSTI Component Stocks

Can you trade the FTSE Straits Times Index?

Well, yes, but the liquidity is very poor. Unlike most other indices that we covered, the FSSTI is poorly traded on the futures market. Instead, the MSCI Singapore Future (factsheet) is the market's preferred vehicle. You can gain exposure to the Singapore stock market via

• Individual stocks
• MSCI Singapore Index Futures (SGX)
• Exchange-Traded Funds (GMG Guide on ETFs)
• Spread trading

The MSCI Singapore Index has a deep overlapping with the STI index. According to this estimate, the correlation between STI and MSCI is around 98%.

Read the GMG Guide on Index Trading.

One of the biggest ETFs based on the STI Index is the SPDR STI ETF (ticker: ES3). This SGD-denominated ETF started in 2002 and has about SGD$800 AUM.

On index futures, they usually expire on March, June, September, and December.

What is the attraction of FTSE Straits Times Index/MSCI Singapore?

Singapore is a major financial hub. This is attractive to investors and traders alike because:

• STI offers exposure to the local and regional financial and property markets, e.g., REITs
• STI has some good dividend yielders e.g., DBS 4.82%, OCBC 4.5%
• STI offers financial stability compared to other regions

What drives the STI/MSCI Singapore Indices?

Stock markets are often driven by a wide variety of factors. For the Singapore stock market, the number one factor is global growth. Like Hong Kong, the Singapore economy is highly dependent on trade between countries and regions. A sustained trade war between China and US may hurt its economy. Other important factors include:

• Monetary factors (e.g., policy rates, exchange rates movements, etc)
• Government driven measures (e.g., property cooling measures)
• Technical factors (e.g., new highs or lows)
• Earning factors (e.g., profitability and earnings momentum)

A 7-Point Guide to trading Asian stock indices

Trading Asian stock indices has always a lure for many aspiring traders. In the past, many western observers referred to Japan/HK/SIN as the 'Far East'. But in these days of instant electronic trading, investing in Asian markets has never been easier. But there are some things you may need to watch out for.

1. Understand that 'Asia' is a very big continent. You have to know which countries you want to invest in. At the minimum, know whether the Asian country you are interested in is a developed, developing or a frontier economy. There are more than 35 countries in Asia, stretching from Japan to Pakistan. So there are a lot of cycles overlapping one another. Other things to watch out for include:
   • Economic cycles
   • Currency trends (managed, pegged, or free float?) - very important
   • Political trends and elections
   • Sector niche
2. Understand your requirements for trading Asian stocks. Are you in just to get a 'kick'? Or do you invest for the long term? Are dividends important? This will dictate what you invest in and how you do it.
3. Anticipate the market catalysts for buying in (or selling out). In many Asian markets, an election can have a massive positive impact on the local stock market. Modi in India is one example. Shinzo Abe of Japan is another. They bring in new policies that often rejuvenate the economy (at least for a while).
4. Research what type of exposure available. Not all Asian markets are available to foreign investors. China used to be a totally closed market but is now gradually opening up. Still, there is a limit. Other countries are more open, such as Singapore and Hong Kong. Therefore, if you are preparing to invest understand how you wish to carry out your transactions. Can you invest locally or through a fund? Can you buy Asian stocks from where you are?
5. Identify the sector niche. Not all countries can be competitive in every sector. For Singapore/HK, the bigger sectors are property, banks, insurance etc. For Indonesia and Australia, resource stocks are better. In Korea, tech/chip stocks are worth watching. So before you invest with MSCI country ETFs or indices, you have to know what the constituents are. Check and see if these stocks are what you want to hold.
6. Examine the risk and reward. Asian markets are very attractive to many investors simply because of the higher growth rates there. China is growing at 5-6%; so is India. Countries like Vietnam, Philippines, Indonesia all showing promising trends one way or another. However, not all is rosy. You can lose serious amount of money if you overpay for securities. So are you buying blue-chip Asian stocks or are you buying growth stocks? Different type of stocks carry different kind of risks.
7. Commit capital but go slow initially. Especially if you're unsure what or how to trade Asian markets. Drip feed capital into Asian funds or ETFs just to experience the pricing behaviour.