The benchmark Straits Times Index (STI), which has notched up half a century in its various incarnations, has turned in a better than expected performance this year.
Fuelled by property and bank stocks, the STI has gained 13 per cent so far this year.
Mergers and acquisitions have also helped to boost its performance. On Friday, the STI closed at 3,255.29 points, down 15.82 points on the day. On the earnings front, results for the first quarter of this year have panned out well, noted Ms Ling Lee Keng, vice-president for equity research at DBS Bank.
At the current level, the STI has rebounded 28.8 per cent from a low of 2,528 in February last year, but is still 8.3 per cent below the March 2015 high of 3,550. Since the global financial crisis in 2008, the STI has surged more than twofold, she said.
The Sunday Times highlights the views of three financial experts.
Mr Daryl Liew, Reyl Singapore's head of portfolio management
Q What is the significance of STI to investors?
A The STI has historical significance as the key barometer for the health of the Singapore stock market. It is also the benchmark against which performance is measured for Singapore equities.
STI HISTORY: A RUN-THROUGH
DEC 30, 1966: The Straits Times Industrial Index's (STII) base rate is created.
MAY 1973: The Stock Exchange of Malaysia and Singapore splits. Malaysia sets up its own stock exchange while Singapore forms the Stock Exchange of Singapore (SES).
OCT 20, 1987: The index suffers its biggest one-day fall ever, in response to the Dow's 508-point plunge. It tumbles 261.78 points, losing 21.4 per cent of its value.
JAN 1, 1990: All the 182 Malaysian-incorporated stocks are delisted from the SES. Fourteen new Singapore counters are added to the index.
1993: The STII enjoys a bull run. In October, Singapore Telecoms goes public with a $1.68 billion equity issue. The counter later becomes a new STII component stock.
FEB 6, 1996: The index hits a 2,493.71-point high.
AUG 28, 1998: The 30-stock STII bows out, replaced by the new Straits Times Index (STI) which has 55 stocks.
APRIL 17, 2002: The first STI ETF is created by State Street Global.
JAN 10, 2008: STI undergoes a major revamp and now comprises 30 blue-chip stocks.
OCT 12, 2007: STI soars to 3,814.38, in the greatest bull run in recent memory.
MARCH 6, 2009: STI plunges to a low of 1,513.12, dragged down by the global financial crisis.
APRIL 30, 2015: STI recovers to 3,487.39, thanks to an Asia-led global recovery.
JAN 29, 2016: STI falls to 2,629.11 due to a China-led global slowdown.
MAY 11, 2017: STI hits a 22-month high of 3,271.11.
As such, the STI has value in providing investors with a reference point and a familiar index to track for a passive investment approach.
Q Which stocks have performed well and poorly so far this year?
A Up till end-April, the real estate members in the STI have driven much of the positive performance. CapitaLand (up 24.5 per cent), City Developments (up 31.8 per cent), UOL (up 20.9 per cent) and Global Logistic Properties (up 30.9 per cent).
The property names have been boosted by the Government's announcement of a slight relaxation in the property cooling measures, as well as news that GLP is considering a potential sale.
Laggards include commodity players Golden-Agri (down 14.8 per cent) and Wilmar (down 1.1 per cent), as well as Singapore Press Holdings (down 1.7 per cent) and Hutchison Port (down 1.8 per cent).
TIPS FOR INVESTORS
The STI is representative of blue-chip stocks traded on the Singapore Exchange. Because of the nature of the local listed market, the STI has been criticised as being representative of Singapore's old economy, and lacking meaningful representation in new economy sectors such as technology and healthcare.
Retail investors should look to complement their STI ETF/tracker funds with other funds or stocks that offer such exposure.
Mr Yeo Kee Yan, vice-president for equity research at DBS
Q What's the outlook for STI?
A Our short-term objective for the STI is 3,250. It may hit as high as 3,350 by year end. We're pegging to a higher PE (price earnings ratio) valuation as year-to-date economic data releases indicate a recovery in both the manufacturing and service sectors.
Q Which are the sectors and stocks to look out for?
A Banks, property and technology sectors have outperformed strongly so far. These leading sectors should see limited upside in the short term and may even consolidate. Interest could rotate to other sectors such as hospitality, consumer durables, airlines and industrials (such as construction equipment and aerospace).
Q What are your top picks?
A Our top 10 stock picks are Thai Beverage, Genting, BreadTalk, Sheng Siong, Sembcorp Industries, UOL, Mapletree Logistics Trust, CDL Hospitality Trust, OUE Hospitality Trust and Venture Corp.
TIPS FOR RETAIL INVESTORS
Instead of chasing highs and lows, investors might consider spreading their investments out on a monthly basis for instance, by investing through regular saving plans such as the POSB Invest-Saver. Such plans help retail investors invest in a disciplined manner and offer a wide range of products from a minimum monthly investment of $100.
At the current level, the STI has rebounded 28.8 per cent from the low of 2,528 in February last year, but is still 8.3 per cent below the March 2015 high of 3,550.
Investors can invest affordably in either Singapore bonds or blue- chip stocks, via two ETFs listed on the Singapore Exchange.
It is designed for those who may not have a huge capital, want to potentially grow their long-term savings, are looking to diversify their portfolio, or are seeking a relatively simple way to invest.
Ms Carmen Lee, head of OCBC investment research
Q How has the STI fared so far this year?
A The STI is up about 12.7 per cent in the year to date, making it one of the best-performing markets in this region and in the world.
In comparison, the Taiwan Taiex is up 7.2 per cent, Malaysia's KLCI is up 7.7 per cent, and the Jakarta Composite Index is up 7.6 per cent. Besides the STI, the Hang Seng and the Kospi are the handful of indexes with double-digit gains so far this year, up 12.8 per cent and 13.1 per cent, respectively. As an indication, the Dow Jones is up 6.3 per cent and the Nikkei is up 3.8 per cent.
Q Which sectors and stocks among the STI constituents have performed the best?
A Gains have been across the board, with strong gains for the financial stocks. All three banks have rallied strongly so far this year. DBS Group Holdings is up 18.3 per cent, OCBC is up 16.8 per cent and UOB is up 15.1 per cent. Jardine Matheson is up 15.2 per cent, while Jardine Cycle & Carriage is up 11.8 per cent.
Property stocks have also done well. Global Logistic Properties is up 33 per cent, City Developments is up 30.1 per cent and CapitaLand is up 21 per cent. Reits have also shown good gains. For example, A-Reit is up 14.1 per cent for the year.
Q What is the outlook for the STI?
A Stocks in general are currently trading at elevated levels versus last year, buoyed by optimism over the global economy. Due to the size of the Singapore market, it will continue to be affected by both regional and global events which could impact corporate earnings.
While the global outlook is improving, risks and volatility remain especially since valuations are now more expensive when compared with last year's level. Oil has also recently dropped below US$50 per barrel.
Q What are the sectors and stocks to look out for?
A We continue to prefer a stock- pick strategy, focusing on quality or undervalued stocks, especially since valuations have moved up higher with the recent gains in share prices.
Q What are your top picks?
A Some of our core favourites include Keppel DC Reit, Frasers Logistics & Industrial Trust, Frasers Centrepoint Trust, CapitaLand, Sheng Siong Group, Raffles Medical Group, Wing Tai and Wheelock Properties.
TIPS FOR RETAIL INVESTORS
Hold a diversified portfolio of quality stocks, including good dividend-yielding and defensive companies. There are undervalued small-mid cap stocks, but do allocate time to gain a better understanding of these firms and their business models before you invest.