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STI & Dividends Generated 9.5% Return in 2014

The Straits Times Index (SGX:^STI) ended at 3365.15 in 2014, representing a 6.2% price gain for the year. Taking the consistent flow of constituent dividends into account, and assuming that income was reinvested, the total return of the STI came to 9.5% for 2014.

This means that for the past three years the annualised total return of the STI was 11.6%. In 2014, the 5 highest total returns within the STI were generated by Olam International Ltd (SGX:O32), Comfort Delgro Corporation Ltd (SGX:C52), Thai Beverage Public Company Ltd (SGX:Y92), Jardine Matheson Holdings Ltd (SGX:J36) and DBS Group Holdings Ltd (SGX:D05). 3 of these constituent stocks – Thai Beverage, Comfort Delgro, DBS Group Holdings, along with United Overseas Bank Ltd (SGX:U11) and Starhub Ltd (SGX:CC3) generated the highest annualised returns over the past 3 years.

Sector Moves

Sector-wise, in 2014, the 4 STI constituents representing the Consumer Staples Sector averaged the same total return as the 10 STI constituents of the Financials Sector at 12.5%. This is based on the Global Industry Classification Standard (GICS®) sector categorisation which is also used to classify stocks in SGX StockFacts.

The Financials Sector is one of the broadest sectors and encompasses a wide range of financial-related services. Financials are further sub categorised into banks, real estate management & development, real estate investment trusts and diversified financial services. Of these four subcategorisations that do have some STI representation, banks faired the best in 2014 with an average total return of 17.8%.

Looking back to 2013, the Telecommunication Services Sector and the Consumer Staples Sectors averaged the highest total returns within the STI. Prior to this, in 2012, Financials and Industrials averaged the highest total returns in the STI. However, unlike 2014, where the banks averaged the strongest performance in Financials, Real Estate Management & Development stocks in the STI averaged the highest returns in 2012.

GICS Sector with STI representation Number of STI stocks Average 2012 Total Return (%) Average 2013 Total Return (%) Average 2014 Total Return (%)
Consumer Discretionary 3 3.9 -0.6 0.7
Consumer Staples 4 1.2 8.0 12.5
Financials 10 41.4 -0.9 12.5
Industrials 11 26.2 3.0 3.1
Telecommunication Services 2 24.9 17.2 6.4

Source: SGX My Gateway, Bloomberg

From a sum-of-the-parts perspective, different performing sectors within the STI has provided for index stability in each of the past 3 years. However when breaking up the STI’s performance over the past 3 years there have been some distinctively different sector performances. A composite of the STI Sector with the strongest average returns in 2012, 2013 and 2014 generated a total return of 71.1% over the 3 years. Meanwhile a composite of the STI Sector with the least average returns in 2012, 2013 and 2014 generated a total return of 1.0%.

Reduction in Board Lot Size on 19 Jan 2015

Effective 19 January, the reduction of board lot size to 100 units will provide investors a means for more effective sector balancing. For instance based on Friday’s prices, a Consumer Discretionary position spread over the 3 STI constituent stocks would require a minimum of S$47,100 with 88% invested on Jardine Cycle & Carriage. With the reduced board lots, an investment portfolio with 33% Jardine Cycle & Carriage, 34% Singapore Press Holdings and 33% Genting Singapore, would require a minimum of S$12,565 using Friday’s prices. This is purely an educational example and transaction costs are not taken into account. Other sectorial investments might include some form of weightage based on market capitalisation, sub-sectors or the use of another sector classification system such as the Industrial Classification Benchmark (ICB).

The table below details the STI returns for the most recent 3 years by the GICS sector level and includes the average performances of the 5 major sectors over the same timeframe.

Name SGX Code MKT Cap S$bn GICS Sector 2012 Total Return(%) 2013  Total Return(%) 2014  Total Return(%) Annualised Total Return: 2011-2014
Average 3.9 -0.6 0.7 0.4
JARDINE CYCLE & CARRIAGE C07 15.2 Consumer Discretionary 3.4 -22.7 22.0 -0.8
SINGAPORE PRESS HOLDINGS T39 6.7 Consumer Discretionary 15.9 12.4 7.4 11.8
GENTING SINGAPORE G13 13.1 Consumer Discretionary -7.7 8.7 -27.2 -10.0
Average 1.2 8.0 12.5 5.9
OLAM INTERNATIONAL O32 4.9 Consumer Staples -25.5 1.4 36.4 1.0
THAI BEVERAGE Y92 17.3 Consumer Staples 68.4 41.1 31.5 46.1
WILMAR INTERNATIONAL F34 20.7 Consumer Staples -32.4 4.10 -3.1 -11.9
GOLDEN AGRI-RESOURCES E5H 5.9 Consumer Staples -5.9 -14.4 -14.9 -11.8
Average 41.4 -0.9 12.5 15.8
DBS GROUP HOLDINGS D05 51.0 Financials 34.0 19.0 24.6 25.7
HONGKONG LAND HOLDINGS H78 21.1 Financials 49.0 -10.6 23.6 18.1
UNITED OVERSEAS BANK U11 39.3 Financials 34.0 10.8 19.5 21.0
ASCENDAS REIT A17U 5.7 Financials 38.4 -1.7 15.3 16.2
CAPITAMALL TRUST C38U 7.1 Financials 31.8 -6.9 13.1 11.5
CAPITALAND C31 14.1 Financials 72.2 -16.5 12.0 17.2
SINGAPORE EXCHANGE S68 8.4 Financials 19.0 7.5 11.9 12.7
OVERSEA-CHINESE BANKING CORP O39 41.7 Financials 28.5 8.2 9.3 14.9
CITY DEVELOPMENTS C09 9.3 Financials 46.5 -24.0 8.2 6.4
GLOBAL LOGISTIC PROPERTIES MC0 12.0 Financials 60.5 5.4 -12.8 13.8
Average 26.2 3.0 3.1 9.5
COMFORTDELGRO CORP C52 5.6 Industrials 30.7 16.8 33.8 26.9
JARDINE MATHESON HLDGS J36 55.8 Industrials 27.2 -10.8 25.2 12.4
SINGAPORE AIRLINES C6L 13.6 Industrials 7.4 -0.6 16.0 7.4
HUTCHISON PORT HOLDINGS TR NS8U 8.0 Industrials 30.1 -4.9 15.9 12.8
JARDINE STRATEGIC HLDGS J37 50.8 Industrials 21.8 -6.3 13.0 8.8
NOBLE GROUP N21 7.7 Industrials 4.1 -5.5 11.0 3.0
SINGAPORE TECH ENGINEERING S63 10.6 Industrials 49.1 7.7 -10.5 12.8
SIA ENGINEERING CO S59 4.7 Industrials 34.9 20.4 -12.3 12.5
SEMBCORP INDUSTRIES U96 7.9 Industrials 33.9 7.7 -15.6 6.8
KEPPEL CORP BN4 16 Industrials 23.0 9.0 -17.8 3.3
SEMBCORP MARINE S51 6.8 Industrials 26.3 -0.3 -24.3 -1.6
Average 24.9 17.2 6.4 15.7
SINGAPORE TELECOMMUNICATIONS Z74 62.2 Telecommunication Services 11.8 16.0 11.3 13.0
STARHUB CC3 7.2 Telecommunication Services 38.1 18.4 1.5 18.4

Source: Bloomberg