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A Mini Tour of the Blue Chip World of the Straits Times Index

Blue chips, or stocks which make up the Straits Times Index (SGX: ^STI), tend to be a favourite among Singapore investors.

The SPDR STI ETF (SGX: ES3), an exchange traded fund (ETF) which mimics the fundamentals of the Straits Times Index, represents one way for investors to participate in the growth of some of the biggest companies in Singapore’s stock market. A recent report from said ETF sheds some light on the inner workings of the Straits Times Index and the fund itself. Here’re eight quick notes which you may find interesting (data as of 31 December 2015 unless otherwise stated):

  1. The SPDR STI ETF’s annualized performance since 11 April 2002 (the fund’s inception) is 6.82% per year if dividends are included.
  2. The banks in Singapore make up a large part of the SPDR STI ETF. To the point, the trio of DBS Group Holdings Ltd (SGX: D05)United Overseas Bank Ltd (SGX: U11), and Oversea-Chinese Banking Corp Limited (SGX: O39) made up close to 35% of the ETF.
  3. If we group the three banks with telecommunications outfit Singapore Telecommunications Limited (SGX: Z74) and property firm Hongkong Land Holdings Limited  (SGX: H78), the quintet had made up more than half of the SPDR STI ETF.
  4. The stock market operator Singapore Exchange Limited (SGX: S68) is a financial services company which is also part of the Straits Times Index. The bank and financial services sector, which is made up of Singapore Exchange and the three banks, is the biggest sector in in the SPDR STI ETF with a 37.27% weightage.
  5. Real estate investments is another big component in the SPDR STI ETF, as it made up 18.4% of the fund, up from 14.5% at end-2014. Hongkong Land Holdings, CapitaLand Limited (SGX: C31), and Global Logistic Properties Ltd (SGX: MC0) are among the eight companies or real estate investment trusts which make up the sector.
  6. The third largest sector would be mobile communications which features the duo of Singtel and StarHub Ltd (SGX: CC3). The sector took up 12.25% of the ETF for 2015, an increase from 10.6% in the previous year.
  7. The departure of the pair of Jardine Strategic Holdings Limited (SGX: J37) and Jardine Matheson Holdings Limited (SGX: J36) in 2015 had caused the general industrials sector’s weighting in the SPDR STI ETF to dwindle from 11.8% in 2014 to just 0.75%. There has been a weightage shift towards bank and financial services, mobile telecommunications, and real estate investments as a result.
  8. On a separate note, the SPDR STI ETF has an annual cost of 0.3% (known as the expense ratio) which can be considered relatively low. In contrast, actively managed funds may have expense ratios of as high as 2.5%.

The SPDR STI ETF closed at $2.69 on 1 March 2016. At its close, it had a price-to-earnings ratio of a little over 11 times and a price-to-book ratio of 1.05. The ETF also offers a trailing distribution yield of 3.7%.

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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 Chin Hui Leong owns shares in Hongkong Land Holdings