STI’s growth reflects Singapore’s economic depth and diversity, say analysts 

SINGAPORE - Just as Singapore has grown over the past 60 years since independence, the Straits Times Index (STI), too, has evolved to better reflect the stock market and the local economy.

The three local banks – DBS Bank, OCBC Bank and UOB – have become much more dominant in the STI, which tracks the 30 largest and most liquid companies listed on the Singapore Exchange (SGX).

Their combined weight is now over 50 per cent, from about 34 per cent in 2014, reflecting Singapore’s rise as a financial hub, according to Ms Belle Chang, senior manager, global investment research team at FTSE Russell, STI’s administrator.

Telecommunications and utilities have also seen growing interest due to advancement in artificial intelligence and demand for data centres, supported by the Government’s Green Data Centre Roadmap, she said. 

With close to half of the revenue earned by companies on the STI generated overseas, the index today offers investors exposure to companies that make their money here, as well as overseas, and international ones too.

It includes international names such as Hutchison Port Holdings Trust and DFI Retail Group, a member of the Jardine Matheson Group, as well as Singapore companies that have been increasing their international business like City Developments and Keppel.

Today’s STI is the latest iteration of Singapore’s benchmark stock index, which dates back to 1966.

The STI has proved resilient during the stock market turmoil caused by US tariff uncertainties.

It has gained about 25 per cent in total returns compared with a year earlier, while its peers in Asean neighbours Malaysia, Vietnam, Thailand and the Philippines have made smaller gains or even losses.

Looking ahead, analysts expect the STI to attract more attention from retail and foreign investors as the Government’s equities market reforms pave the way for more high-growth firms to join its ranks.

SGX’s head of equities, Mr Ng Yao Loong, told The Straits Times: “Ongoing efforts to strengthen our stock market should lead to more listed companies with strong growth fundamentals becoming index-ready, even if they are currently outside the STI.

“This will help ensure the STI remains a relevant benchmark index that reflects the depth, dynamism and diversity of Singapore’s economy.”

Since the equities market reform group was set up in August 2024, the STI has risen around 25 per cent, outperforming the MSCI Asia Pacific Index’s 13 per cent gain. 

The three local banks and companies with market capitalisation above US$20 billion (S$25.6 billion) led the initial rally. 

Following the announcement of the first set of measures to strengthen the equities market development in February 2025, the buying shifted to asset-heavy sectors such as utilities, property developers and energy as well as firms with market value between $600 million and $25.6 billion.

US investment bank Goldman Sachs expects to see stricter disclosure rules and a stronger focus on rewarding shareholders in the next phase of measures. It noted that companies usually start by giving investors more details about their financial goals, then move on to rewarding shareholders through buybacks and dividends, as well as mergers or acquisitions.

These were witnessed when Japan, South Korea and China reformed their markets.

In Singapore, real estate stocks have the most room to improve disclosures and shareholder returns, said Goldman Sachs, which has a buy call on Keppel, CapitaLand Investment and UOL. 

Utilities group Sembcorp Industries has capacity for higher dividend, supported by “a robust debt profile and ongoing portfolio optimisation”, Goldman Sachs said.

Among the telecoms companies, StarHub has room to improve shareholder returns, but Goldman Sachs does not think major changes are likely in the near term.  

It expects DBS, OCBC and UOB to continue to return excess capital to shareholders. 

Mr Hugh Chung, chief investment officer at wealth adviser and investment platform Endowus, said Singapore’s stable and predictable political landscape, attractive dividend yields from the STI’s constituent companies and a stable Singapore dollar, make the home market appealing amid rising geopolitical uncertainty.

Endowus launched the Amundi Singapore Straits Times (STI) Fund in July, the first unit-trust-based index fund tracking the STI by a global asset manager in Singapore.

Mr Chung said Singapore stocks can act as a stabilising and income-generating element within a broader, globally diversified portfolio. They can complement other growth-oriented or more volatile segments of their overall investment allocation.

Concentrating solely on the STI means forgoing exposure to critical global growth drivers, such as the hyperscalers dominating the technology landscape in the US; the luxury goods and healthcare innovators in Europe; the world’s largest automotive manufacturers; and the vast consumption stories unfolding in the US, China and India, he said.

Despite the STI’s strong recent performance, investors should have a diversified portfolio across countries, sectors and asset classes. “Attempting to trade on news or make short-term tactical bets in response to specific policy announcements or recent performance spikes carries inherent risks and is generally not conducive to consistent wealth accumulation,” Mr Chung said.