Is it too late to put money into the Straits Instances Index right this moment?

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

What’s driving the STI’s progress?

In the event you’re like most Singaporeans, likelihood is that an exchange-traded fund (ETF) monitoring the Straits Instances Index (STI) was possible your first funding foray into the markets.

It’s native, acquainted to us, and sometimes 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 lately.

Sturdy financial progress

A inventory market can usually be seen as a barometer for the nation’s financial system. In 2023, I wrote that buyers eager 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% prior to now 4 years since COVID hit, and our political stability and diversified financial system proceed to make Singapore a protected haven for companies and buyers.

A strong monetary sector

Because of the rising rate of interest atmosphere, internet curiosity margins (NIMs) have expanded for our native banks, translating into report income and beneficiant dividends. In actual fact, in the event 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 larger, and DBS, OCBC and UOB mixed now accounts for barely over 50% of the index right this moment.

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

Assist 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 embrace serving to firms enhance their investor communications, fostering better investor confidence and higher share worth efficiency.

With sturdy authorities help, this can be a long-term catalyst that bodes properly for anybody investing within the STI right this moment. In my view, barring an financial disaster, I consider that the final long-term pattern is up. 

Sturdy, defensive performs

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

Throughout risky world durations, buyers are inclined to rotate into these “defensive” performs – additional strengthening the STI’s enchantment.

Excessive dividend yields

In the event you didn’t already know, primarily based on the typical dividend yield throughout the final 10 years, the STI gives one of many highest dividend yields in comparison with different world market indices.

On the time of writing, the STI ETF (reminiscent of ES3 or G3B) nonetheless gives 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 Dangle 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 earnings you’d earn per greenback invested primarily based 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. While 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% prior to now 12 months on the again of ongoing tariff disputes and rising US debt ranges. In the event you’re a Singapore-based investor, this issues as a result of once you make investments closely in US belongings, your returns will likely 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 a substitute obtained a 22% return with out struggling any forex change losses.

In the event you agree with the consultants who consider that the Singapore greenback might 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 danger, and even the STI isn’t any exception.

Restricted progress potential

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

Nevertheless, DBS believes that the STI might nonetheless rise to just about 10,000 factors by 2040 if historic return patterns maintain, as 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 if the monetary sector takes a success – reminiscent of on account of world rate of interest cuts or credit score dangers — buyers might discover their STI portfolio take a heavy hit.

International financial slowdown

Singapore’s financial system is tightly linked to world commerce. As such, a slowdown in China, disruptions in world provide chains, or weaker world demand might negatively influence Singapore’s export-oriented firms.

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

So is the STI nonetheless price 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 probably not 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 12 months. Traders can try the historic efficiency of the STI right here:

Supply: Yahoo Finance.

The STI was up by 22% final 12 months, and has been steadily climbing to this point in 2026 whereas the S&P 500 has remained flat. With the latest catalysts lined above, I consider 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 permit us to sleep peacefully at night time.

In my view, that’s why many folks make investments usually 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 might help soften the blow when one specific inventory takes a success.

In the event you worth stability and also you’re in search of publicity to Singapore’s blue-chip firms whereas getting a dependable stream of passive earnings from dividends, then the STI will nonetheless make sense right this moment. That is particularly so in the event you’re nonetheless constructing your core portfolio and investing by way of your CPF/SRS. However in the event you’re younger and chasing aggressive progress, then the STI would possibly seem much less enticing than its overseas market counterparts or different growth-oriented investments.

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

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

Easy methods to put money into the STI right this moment

You may journey on the expansion of the STI by shopping for an ETF or a unit belief that tracks it. One common possibility is the Amova Singapore STI ETF, which at present manages over $1 billion AUM of buyers’ cash. It’s simply accessible, as you will discover it out there by means 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 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 holding 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 Growth Programme (EQDP), an initiative to deepen liquidity, strengthen analysis, and enhance investor confidence. Constructing on almost 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 good for buyers who need their dividends³ to be mechanically reinvested for them. This may even be eligible for investing along with your CPF funds.

Click on right here to search out out extra!

Disclosure: This submit is delivered to 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 to your particular scenario(s) as I do know nothing about your particular person monetary circumstances, danger tolerance or funding goals. I extremely suggest that you just 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. Be sure you click on into the respective hyperlinks above to retrieve the fund prospectus and efficiency in order that can assist you determine whether or not it suits into your funding goals.

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