In the first seven months of 2014, the Straits Times Index (SGX:^STI) generated a total return of 8.3%, compared to a 1.2% total return for the Dow Jones Index and a 3.2% decline for the Nikkei 225 Index. The STI has maintained a stronger performance than the Dow Jones Industrial Average and the Nikkei 225 over the past 10 years. As of Thursday 31 July, the STI had generated a price gain of 84% over the preceding 10 years versus 63% for the Dow Jones and 38% for the Nikkei 225. When taking SGD appreciation into account,…
In the first seven months of 2014, the Straits Times Index (SGX:^STI) generated a total return of 8.3%, compared to a 1.2% total return for the Dow Jones Index and a 3.2% decline for the Nikkei 225 Index.
The STI has maintained a stronger performance than the Dow Jones Industrial Average and the Nikkei 225 over the past 10 years. As of Thursday 31 July, the STI had generated a price gain of 84% over the preceding 10 years versus 63% for the Dow Jones and 38% for the Nikkei 225.
When taking SGD appreciation into account, which was 37% to the US Dollar and 27% to the Japanese Yen, the 10 year returns of the Dow Jones and Nikkei 225 were trimmed significantly to Singapore investors. Adjusting to take into account the SGD appreciation, the Dow Jones gain was 18% and the Nikkei 225 gain was 8% over the ten year period.
For investors who had exposure to the STI over the 10 years, the 84% was the price alone performance. Exchange Traded Funds (ETFs), which can provide the benefits of an index in a single security, also track the STI and pay the STI’s dividends. One of these ETFs has been trading since 2002 and generated a total return of 140% over the past 10 years. According to Bloomberg – this return which took into account reinvested dividends – amounted to a 9.2% annualised return over the 10 years.
Investing in international stocks typically serves investors that seek to diversify their portfolio because of potential economic and valuation differences of companies abroad. The performance of the international based stock in the portfolio can be helped if the international currency appreciated to the at-home currency as well. However the reverse can also eventuate, as noted above, where the international currency depreciates to the at-home currency.
Much of the social and economic internationality of Singapore resonates into its stock market. A unique regional attribute of the STI is that the majority of its constituents have significant international revenue reach. As detailed in the table below, Asia Pacific is a key focus of all 30 stocks, with all stocks having exposure to the region.
|Name||SGX Code||MKT Cap S$M||Asia Pacific Geo Seg Rev or Net Rev %:Y||EMEA – Europe, Middle East, Africa Geo Seg Rev %:Y||The Americas Geo Seg Rev %:Y||Total Return YTD|
|JARDINE MATHESON HLDGS LTD||J36||50,625||93.8||5.6||13.4|
|JARDINE STRATEGIC HLDGS LTD||J37||49,653||98.9||0.3||10.3|
|DBS GROUP HOLDINGS LTD||D05||45,043||96.6||9.0|
|UNITED OVERSEAS BANK LTD||U11||37,118||94.0||12.0|
|OVERSEA-CHINESE BANKING CORP||O39||34,648||98.5||-1.0|
|WILMAR INTERNATIONAL LTD||F34||20,861||78.7||11.3||-3.1|
|HONGKONG LAND HOLDINGS LTD||H78||20,324||100.0||18.3|
|KEPPEL CORP LTD||BN4||19,694||84.4||10.8||0.7|
|JARDINE CYCLE & CARRIAGE LTD||C07||16,469||100.0||32.0|
|GENTING SINGAPORE PLC||G13||16,346||100.0||-10.0|
|THAI BEVERAGE PCL||Y92||15,443||100.0||16.2|
|GLOBAL LOGISTIC PROPERTIES L||MC0||13,545||98.8||1.2||-1.5|
|SINGAPORE TECH ENGINEERING||S63||11,821||58.3||6.3||25.7||-1.3|
|SINGAPORE AIRLINES LTD||C6L||11,742||71.9||20.1||7.9||-0.5|
|SEMBCORP INDUSTRIES LTD||U96||9,775||57.8||23.1||13.3||2.8|
|NOBLE GROUP LTD||N21||9,482||23.1||16.0||60.8||33.0|
|CITY DEVELOPMENTS LTD||C09||9,448||58.0||9.7||14.1||9.0|
|SEMBCORP MARINE LTD||S51||8,544||30.5||33.3||26.0||-6.3|
|HUTCHISON PORT HOLDINGS TR-U||NS8U||7,764||100.0||13.0|
|SINGAPORE EXCHANGE LTD||S68||7,671||100.0||-0.1|
|GOLDEN AGRI-RESOURCES LTD||E5H||6,868||83.9||13.8||-1.0|
|SINGAPORE PRESS HOLDINGS LTD||T39||6,622||96.6||2.2|
|OLAM INTERNATIONAL LTD||O32||6,002||40.8||43.9||15.3||60.3|
|ASCENDAS REAL ESTATE INV TRT||A17U||5,553||100.0||8.4|
|COMFORTDELGRO CORP LTD||C52||5,470||78.6||21.4||29.8|
|SIA ENGINEERING CO LTD||S59||5,234||100.0||-4.4|
Source: Bloomberg (data as of 1 August 2014)
Of the 11 stocks that reported all of their revenue to Asia Pacific in the last financial year, seven reported some revenue outside of Singapore. Also please note that while revenue can be reported in Singapore, the end customer, on an individual or wholesale basis, could be elsewhere in the world.
Many of the 30 STI stocks have also helped provide Singapore’s links to the world, for instance – the first circulation of the Straits Times Newspaper dates back to 1845, Keppel Harbour’s first dry dock was built in 1859 and Singtel’s heritage dates back to a service of fifty lines in a telephone exchange in 1879.
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