How many shares of telecommunications operator SingTel (SGX: Z74) do you think you own? On first glance, that seems a ridiculous question – a simple check of someone?s Central Depository account should do the trick. But, that?s not all there is to it.
Turns out, for investors who own individual shares as well as a host of funds centred on Singapore?s stock market, they might own way more SingTel shares then they realise.
Telecommunications operator SingTel (SGX: Z74) is Singapore?s largest publicly-listed company by market capitalisation, currently just shy of…
How many shares of telecommunications operator SingTel (SGX: Z74) do you think you own? On first glance, that seems a ridiculous question – a simple check of someone’s Central Depository account should do the trick. But, that’s not all there is to it.
Turns out, for investors who own individual shares as well as a host of funds centred on Singapore’s stock market, they might own way more SingTel shares then they realise.
Telecommunications operator SingTel (SGX: Z74) is Singapore’s largest publicly-listed company by market capitalisation, currently just shy of S$60b. Temasek Holdings, the investment arm of Singapore’s government, owns 52% of the telco as of 31 March 2013. So, there’s almost S$30b worth of SingTel’s shares being up for grabs in the market, including the stakes of other minority-but-still-significant shareholders.
With such a high monetary-amount of shares lying around, it’s inevitable that Singapore-centric equity funds would own huge bulks of it.
According to FundSingapore.com, the top three funds by assets under management (AUM) with a geographical focus on Singapore are iShares MSCI Singapore Index Fund, Schroder Singapore Trust Class A and Aberdeen Singapore Equity Fund. As of 31 May 2013, these funds have AUMs of US$1.52b, S$904m and S$565m respectively. That’s a substantial amount of money invested with those funds, which signals high ownership among investors in Singapore.
Circling back to SingTel, it was unsurprisingly the top holding for both the iShares and Schroder funds, and occupied eighth spot on Aberdeen’s fund. And, herein lies the problem – investors who own shares of SingTel in addition to these funds (a highly likely scenario given the dollar amounts at play here) might end up with a lopsided allocation toward the telco’s shares, leaving them dangerously overexposed to the fate of just one company.
The problem is not just confined to SingTel. The banks – DBS Group Holdings (SGX: D05) , United Overseas Bank (SGX: U11) and Overseas-Chinese Banking Corporation (SGX: O39) – all carry huge market values north of S$30b each and they are also represented heavily in those funds. For example, DBS occupies second spot amongst the holdings for both the iShares and Schroder funds and is at fourth place with the Aberdeen Singapore Equity Fund (as of 31 May 2013).
Of course, there’s always a case to be made for investors who want more concentration in a particular company like SingTel. But, that’s a conscious decision, a different beast from unknowingly accumulating too many shares in SingTel because of ownership of both its shares as well as funds that invested heavily in the telco.
Foolish Bottom Line
At the end of the day, it is important for an investor who owns funds to know its big holdings so as to evaluate how truly diversified his overall equity-portfolio really is. Otherwise, the risk of being unknowingly overexposed to big allocations in particular companies might just come back to haunt him.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.