“They present investors with a chance to diversify their holdings across Singapore's leading companies and engage Singapore’s long-term growth potential through a single, cost-effective transaction,” says the team.
In an unrated report dated Jan 4, the team estimates that the implied value for the Nikko AM Singapore STI ETF is $3.69 while the SPDR Straits Times Index ETF's implied value is $3.73. The values are derived from the weighted average consensus target price upside/downside percentage of the STI’s component stocks.
About half of the holdings in both ETFs are in Singapore’s three banks, DBS Group Holdings , Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB). The dividend yields for banks are currently attractive at 5.7% with upside surprises due to excess capital ratios and the push towards higher returns on equity (ROEs).
Real estate is the second highest sector featured in both ETFs, at 18% each.
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“Singapore's real estate market is known for its stability, transparency, and well-regulated environment. Strong governmental policies contribute to a secure investment landscape. Despite occasional fluctuations, Singapore's real estate market has shown resilience over time, offering long-term capital appreciation. Limited land supply and steady demand often support property values,” explains the team. Singapore also has a strong rental market, which means investment properties can provide steady income stream through rental yields, particularly in prime locations.
The industrials sector stood third, with a 16% weightage in the Nikko AM STI ETF and 8% in the SPDR Straits Times Index ETF. This is attributable to Singapore’s strategic location in Southeast Asia, which makes it a key hub for logistics, manufacturing, and trade.
Both ETFs distribute their dividends on a semi-annual basis at an average yield of 3.30%, which is attractive compared to the Singapore 10-year government bond’s 3% yield, says the team.
See also: Understanding the yield curve and what it means for bonds, stocks and currencies
As at 3.28pm, the STI is trading 30.45 points lower or 0.95% down at 3,167.51 points.
See the tables below for the sector breakdown and weighted dividend yield per stock within the ETF.
