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The Most Influential Singapore Companies That Move The Singapore Stock Market

Some companies in Singapore hold more sway than others. But a handful of companies may be influential enough to move Singapore’s stock market.

The Straits Times Index  (SGX: ^STI), or STI for short, is often seen as a barometer for Singapore’s stock market. The index is made up from 30 of the largest listed companies on the Singapore stock market. These companies come from a variety of industries and sectors. The banking industry, in particular, carries more weight compared to other industries.

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Banking On A Trio

Singapore local banking trio, namely DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corp Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11), make up approximately 41% of the index, as of the end of August 2018. That means the performances of these companies have a significant impact on how the index performs. Here is a brief background about the three banks.

  1. DBS the largest ASEAN bank with a market capitalisation of just under S$64 billion. It is also the largest Singapore constituent in the index with a 15.8% weightage. DBS’s total assets stood at S$540 billion at the end of June 2018.
  2. OCBC is second bank in the list with a weightage of 13%. OCBC has a market capitalisation of over S$47 billion, and manages total assets worth almost S$465 billion.
  3. UOB holds a weighting of 12.2%. UOB has a market capitalisation which stands at around S$45 billion. UOB’s total assets came in at S$384.6 billion at end June 2018.

The table below summaries its performance over the past ten years together with its current price-to-book (P/B) ratio, dividend yield, and year to date (YTD) returns.

From the table above, we can see that two out of the three banks have posted negative year to date returns. The poorest performer was OCBC bank with a drop-in price of 9.5%, followed by DBS which has seen its share price drop by about 1%. UOB was the only bank which has been able to buck the trend, and is up by 1.6% for the year.

The lacklustre performance of the three banks year to date highlights their importance for the index which has also registered a poor showing; The STI is down 6.2% year-to-date. With the banking industry making up over 40% of the index, this sector is the most important out of all the industries in determining how the STI index performs.

What’s Ahead

From a valuation respective, measured by the P/B ratio, OCBC and UOB are both trading at similar valuations while DBS is more expensive with a P/B ratio that is approximately a 13% higher. The valuations of the three banks look undemanding at the moment, leaving room for future returns.

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The Motley Fool Singapore contributor Esjay contributed to this article.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.The Motley Fool Singapore has recommended shares of United Overseas Bank, and DBS Group. Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned. Motley Fool Singapore contributor Esjay does not own any of the shares mentioned.