Is it too late to spend money on the Straits Occasions Index immediately?

On this article, I study the alternatives driving the momentum, assess key dangers that buyers ought to look out for, and share how Singapore investments play a task in my very own portfolio.

What’s driving the STI’s progress?

If you happen to’re like most Singaporeans, chances are high that an exchange-traded fund (ETF) monitoring the Straits Occasions Index (STI) was possible your first funding foray into the markets.

It’s native, acquainted to us, and infrequently seen as a protected, slow-and-steady choice to construct our long-term wealth.

However with the STI just lately hitting a multi-year excessive, I do know many individuals are questioning: “Ought to I nonetheless purchase in now? Or have I missed the boat?”

To determine this out, we have to first perceive what’s driving the STI ‘s progress in recent times.

Robust financial progress

A inventory market can usually be seen as a barometer for the nation’s economic system. In 2023, I wrote that buyers desirous to journey on Singapore’s financial progress can try STI ETFs for his or her portfolio.

That thesis has performed out completely. Singapore’s GDP surged over 50% up to now 4 years since COVID hit, and our political stability and diversified economic system proceed to make Singapore a protected haven for companies and buyers.

A sturdy monetary sector

Due to the rising rate of interest surroundings, web curiosity margins (NIMs) have expanded for our native banks, translating into file earnings and beneficiant dividends. The truth is, in case you’ve held onto Singapore financial institution shares within the final 2 years like I’ve, you’ve in all probability smiled at your dividend payouts.

Because the STI is weighted by market capitalisation, the expansion in Singapore’s 3 largest banks has pushed the index greater, and DBS, OCBC and UOB mixed now accounts for barely over 50% of the index immediately.

Though which may sound overly concentrated, the STI’s tech-lite nature could make it a very good diversification device for tech-heavy portfolios.

Help from the Financial Authority of Singapore (MAS)

To revitalise the Singapore market, MAS is pouring $5 billion into efforts to enhance market liquidity, entice listings, and revitalise the SGX. MAS additionally introduced final month that its efforts will embody serving to corporations enhance their investor communications, fostering higher investor confidence and higher share worth efficiency.

With robust authorities help, this can be a long-term catalyst that bodes effectively for anybody investing within the STI immediately. In my view, barring an financial disaster, I imagine that the final long-term development is up.

Robust, defensive performs

The STI has loads of blue-chip shares which are comparatively resilient in occasions of world uncertainty. From REITs to move to telcos, the STI is full of corporations offering important providers.

Throughout unstable international durations, buyers are likely to rotate into these “defensive” performs – additional strengthening the STI’s attraction.

Excessive dividend yields

If you happen to didn’t already know, based mostly on the common dividend yield throughout the final 10 years, the STI presents one of many highest dividend yields when put next with different international market indices.

On the time of writing, the STI ETF (equivalent to ES3 or G3B) nonetheless presents a trailing^ dividend yield of round 4%¹ with the potential for capital positive aspects. That is above the dividend yield of different main indices, such because the Hold Seng Index and the S&P 500 Index. And within the US, dividends have traditionally contributed to roughly a 3rd of whole market returns.

^Observe:  Trailing dividend yield is the annual dividends paid over the previous 12 months divided by the present share worth, exhibiting how a lot revenue you’d earn per greenback invested based mostly on historic payouts.

One other factor to notice is that Singapore dividends are tax-free, whereas US dividends are topic to a 30% withholding tax for overseas buyers. Once you’re investing for the long term, that distinction provides up considerably over time.

A weakening US greenback

The US greenback has fallen greater than 10% up to now yr on the again of ongoing tariff disputes and rising US debt ranges. If you happen to’re a Singapore-based investor, this issues as a result of if you make investments closely in US property, your returns shall be affected by forex modifications.

To place issues into perspective, the S&P 500 might have gained 16% in 2025, however the weaker forex meant that Singapore buyers solely obtained single-digit returns² after changing again to Singapore {dollars}. In distinction, Singapore buyers who went for the STI as an alternative obtained a 22% return with out struggling any forex alternate losses.

If you happen to agree with the specialists who imagine that the Singapore greenback may attain parity with the US greenback by 2040, then this makes a powerful case for investing in our native markets.

However…what are the dangers?

In fact, no funding is with out threat, and even the STI is not any exception.

Restricted progress potential

In comparison with high-growth markets just like the US or China, the STI could appear comparatively conservative. There’s no Apple, NVIDIA or Alibaba equal in our native index, so in case you’re gunning for double-digit annual returns, then you might be upset.

Nonetheless, DBS believes that the STI may nonetheless rise to just about 10,000 factors by 2040 if historic return patterns maintainas indicated of their Singapore 2040 report right here.

Focus dangers

At time of writing, half of the STI is made up of simply 3 banks. Which means that if the monetary sector takes a success – equivalent to as a consequence of international rate of interest cuts or credit score dangers — buyers might discover their STI portfolio take a heavy hit.

International financial slowdown

Singapore’s economic system is tightly linked to international commerce. As such, a slowdown in China, disruptions in international provide chains, or weaker international demand may negatively influence Singapore’s export-oriented corporations.

We might really feel the ripple results, and so might the STI.

So is the STI nonetheless value investing in?

I realized this just lately from Amova Asset Administration’s Head of Asian Fairness, Lai Yeu Huan, who identified that “anybody underneath the age of 40 in Singapore has not likely seen a Singapore markets growth. However the older buyers will keep in mind the mid-2000s and mid-Nineties.”

Certainly, within the Nineties, the STI jumped by 59% in 1993 and 78% in 1999. Between 2003 to 2007, the STI grew by greater than 10% each single yr. Traders can try the historic efficiency of the STI right here:

Supply: Yahoo Finance.

The STI was up by 22% final yr, and has been steadily climbing thus far in 2026 whereas the S&P 500 has remained flat. With the latest catalysts coated above, I imagine there’s nonetheless extra potential upside for the Singapore equities market to develop additional.

As buyers, we try to construct a portfolio that won’t solely develop for us, however enable us to sleep peacefully at night time.

In my view, that’s why many folks make investments repeatedly in a powerful basis of market index ETFs, together with that of their very own nation, which they could understand as an anchor. Investing in a basket of diversified shares may also help soften the blow when one specific inventory takes a success.

If you happen to worth stability and also you’re on the lookout for publicity to Singapore’s blue-chip corporations whereas getting a dependable stream of passive revenue from dividends, then the STI will nonetheless make sense immediately. That is particularly so in case you’re nonetheless constructing your core portfolio and investing through your CPF/SRS. However in case you’re younger and chasing aggressive progress, then the STI would possibly seem much less engaging than its overseas market counterparts or different growth-oriented investments.

Additionally, don’t overlook the SGD benefit — investing within the STI means you’re not uncovered to overseas alternate threat. That’s one other layer of stability that’s simple to miss.

Personally, investing within the Singapore markets have been a secure supply of progress and reassurance for me, and permits me to have peace of thoughts whereas I pursue greater progress alternatives within the extra unstable US and China markets.

How you can spend money on the STI immediately

You’ll be able to journey on the expansion of the STI by shopping for an ETF or a unit belief that tracks it. One fashionable possibility is the Amova Singapore STI ETF, which at the moment manages over $1 billion AUM of buyers’ cash. It’s simply accessible, as you’ll find it out there by way of your brokerage accounts and even use it for investing along with your CPF or SRS funds.

It additionally has a low whole expense ratio (TER), capped at 0.25% p.a.. Which means that for each $100 {dollars} you make investments, your prices are not more than $0.25. This makes the Amova Singapore STI ETF an effective way to get publicity whereas maintaining your prices minimal.

Sponsored Message: Advancing Singapore Fairness Market
Amova Asset Administration Asia has been appointed by the Financial Authority of Singapore (MAS) to handle a Singapore fairness portfolio underneath the Fairness Market Improvement Programme (EQDP), an initiative to deepen liquidity, strengthen analysis, and enhance investor confidence. Constructing on practically 4 a long time of management, we stay dedicated to advancing Singapore’s fairness market.

Conclusion

What’s even higher is that they’re now launching a brand new accumulation share class, which makes it excellent for buyers who need their dividends³ to be robotically reinvested for them. This can even be eligible for investing along with your CPF funds.

Click on right here to seek out out extra!

Disclosure: This publish is dropped at you in collaboration with Amova Asset Administration. All analysis and opinions are that of my very own, and shouldn't be taken as monetary recommendation on your particular state of affairs(s) as I do know nothing about your particular person monetary circumstances, threat tolerance or funding goals. I extremely advocate that you simply use this as a place to begin to grasp extra about Amova’s STI ETFs – together with their accumulating and distributing class - which you need to use for money, CPF or SRS investing. You'll want to click on into the respective hyperlinks above to retrieve the fund prospectus and efficiency in order that will help you determine whether or not it suits into your funding goals.

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