Singapore equities are drawing renewed attention as investors look beyond the US for returns, income and lower volatility. From the perspective of Kunhee Park, ETF equities investment strategist, APAC, at State Street Investment Management, the recent positive performance of the Straits Times Index (STI) should prompt investors to review how much exposure they have to Singapore rather than ignore it.
The STI has risen more than 94% in total return terms since end-April 2021, making it one of the best-performing single-country equity markets globally and ahead of the US in SGD terms. At the Shaping Tomorrow's Markets: ETF Strategies and Economic Outlook event hosted by The Edge Singapore in collaboration with State Street Investment Management on Mar 24, Park presented that the STI has outperformed the MSCI ACWI by 46.66% since Jan 2021, while Singapore’s weight in global indices has edged up from a trough of 0.3% in 2021 to 0.4% as at end-February 2026.
For Park, that strong run is not just a price story, but points to a broader shift in investor flows away from an overwhelming concentration in US equities. “More recently, we’re seeing a broadening and more opportunities outside of the US, particularly in Asia,” he says, while indicating that 76% and 85% of non-US countries in the MSCI ACWI outperformed the US market in 2024 and 2025 respectively. February flows also favoured developed markets ex-US, emerging markets and single-country exposures over the US.
Singapore has been a beneficiary, though Park argues the inflows still do not fully match the market’s outperformance. He notes that Singapore-focused exchange traded funds (ETFs) globally recorded around $280 million in net inflows in February alone. At the same time, turnover on SGX has risen sharply, with total monthly market turnover increasing from just under $20 billion in December 2023 to $35 billion in January 2026, signalling deeper liquidity and stronger investor participation.
While the inflows are undeniable, this does not signal for a complete portfolio switch. “I’m not saying the entirety of your portfolio into Singapore,” he says. “I’m saying you should take a closer look, more of a consideration into how much STI you are currently holding.”
In Park’s view, Singapore equities do present a compelling investment case, but this does not mean that it should completely replace global equities. Instead, perhaps act as a diversifier to improve portfolio construction at the margin.
The case for Singapore
According to Park, three key pillars that support the Singapore equities stance are valuation, income and defensiveness.
On valuation, STI’s 10-year average PE ratio is about 15x times, and even after the latest rally, Park says it remains relatively cheap against developed market peers, the broader world index and Asia-Pacific markets. He adds that 2026 earnings growth consensus is still running at around 4% to 5%, suggesting that price gains have not fully detached from underlying earnings prospects.
The STI has also been popularly known for its consistent income. The STI’s dividend yield stood at 3.8% at end-February, higher than many regional peers and above alternatives such as T-bills, one-year fixed deposits and the CPF Ordinary Account. Park says this yield has also been supported by discipline rather than overstretch. “The average dividend payout ratio was around the 45% to 50%,” he says. “That means companies are paying out half of their earnings, roughly, and reinvesting the other half for growth.” In his view, that gives investors “confidence of the stability of the dividends” while preserving room for future expansion.
In addition, Park describes the STI as defensive, offering “a bit of a cushion” during periods of geopolitical and macro uncertainty, helped by its high bank weightings, lower exposure to technology and relatively stable dividends. State Street Investment Management’s data shows the STI has the lowest three-year annualised volatility among the Asian markets in its comparison set. The index’s correlation with the Russell 1000 was -0.1 over one year and stayed below 0.7 even over longer periods, which Park says makes Singapore useful as a diversifier. “Singapore has an incredibly low beta so it is more driven by local structural factors than top level broader markets,” he says.
That does not mean Singapore is a purely domestic story. The STI’s earnings base is geographically diversified and is a “gateway to global economic growth”. State Street Investment Management estimates that only 41% of constituent revenues come from Singapore, with 10% from broader Southeast Asia, 29% from the rest of Asia-Pacific and 20% from outside Apac. Park says this gives investors exposure to growth in markets such as Indonesia, Vietnam and Malaysia while reducing reliance on Singapore’s domestic cycle. In that sense, the STI offers both defensiveness and external growth exposure.
Strong base
He points to strong policy support from the local government, such as initiatives by the Monetary Authority of Singapore (MAS) aimed at improving market liquidity, listings, research coverage and investor engagement, including the now $6.5 billion Equity Market Development Programme (EQDP) to help rejuvenate the equity market.
Perhaps the strongest practical argument comes from the hypothetical portfolio analysis Park presented. Using historical data, State Street Investment Management found that adding a 10% STI allocation to an MSCI ACWI portfolio improved the risk-return profile over three and five years, with slightly higher returns and lower volatility. “I’m not arguing for 100% STI or a 100% Singapore equity allocation,” Park says. “But I ask you to consider potentially increasing your weight and taking a closer look at the benefits of adding such an index as the Straits Times Index into your portfolio, because it can have these positive, defensive cushioning characteristics while giving some attractive yield and upside potential.”
Growing popularity of ETFs
In a more practical aspect, there are easy ways for investors to ride on the STI’s gains. ETFs have turned out to be a popular investment product following their introduction in 2002. The first ETF to be listed on the SGX was the ETF with the stock code ES3, the State Street® SPDR® Straits Times Index ETF by State Street Investment Management. This is the most liquid and the most traded locally domiciled ETF today [1].
During The Edge Singapore’s forum titled Shaping Tomorrow's Markets: ETF Strategies and Economic Outlook on March 24, a large part of the panel discussion focused on the merits of using the STI ETF during periods of volatility, such as the Iran war.
To take a step back, ETFs (exchange-traded funds) are baskets of assets, often stocks, that trade on an exchange, much like a stock. They are meant to replicate the index they track, but with a small displacement because of the expense ratio. Since their appearance on the SGX 24 years ago, ETFs have become a popular investment product for both retail and institutional investors.
The basket of assets in an ETF may track a wide range of indices including the STI and S&P 500. ETFs such as the State Street® SPDR® Straits Times Index ETF and State Street® SPDR® S&P 500® ETF Trust are often bought and sold on various trading platforms either as a diversification from single stocks and/ or sectors, or as a form of a hedge, as in the case of SPDR® Gold Shares (State Street Investment Management’s gold ETF). Often, when investors look to exposures in markets, an index ETF can work better than a narrow market representative such as a sector or a stock.
Janjira Jaruprateepkul, Vice President and Head of Southeast Asia Intermediary at State Street Investment Management, explains that ETFs share the characteristics of the underlying shares of the index they track. “If you are familiar with unit trusts or funds, in the ETF world, it's quite unique in the sense that ETFs share the characteristics of the underlying stocks and funds (they represent),” she says.
ETFs offer two layers of liquidity - the primary market and the secondary market. The secondary market, is where most investors trade ETFs. Here, buyers and sellers of ETF shares place their orders through registered brokers, exchanging cash for ETF shares when buying and vice versa for selling.
The primary market supports ETF liquidity and allows ETFs to trade close to net asset value (NAV) throughout the day.
ETFs are often traded like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs NAV.
“If you want to purchase the fund, or unit trust, you get to know the NAV, probably on the next day. With the ETF, which is traded on the exchange, you have the ability to see the real time pricing on the exchange. That means, when you execute the trade, especially at these uncertain times where you want to have that ability to be able to execute in real time, and to react to the situation,” Jaruprateepkul notes.
When the demand for ETF shares exceeds or falls short of the shares available for sale in the secondary market, there will be disparities between the ETF market price and its NAV based on underlying security prices.
The primary market then provides additional liquidity, as market makers will engage authorised participants to create or redeem ETF shares to balance the supply and demand, thereby keeping ETF share prices close to their NAV.
“The creation and redemption in the primary market adds a layer of liquidity to the ETF, because the authorised participants, or the participating dealer who has an agreement with the fund issuers like us, can create or redeem instantly within the window, and provide that liquidity in the secondary market. The exchange will be able to utilise those units immediately,” Jaruprateepkul explains.
Since the STI ETF is liquid, a major advantage it has over unit trusts, investors can just sell out if they are spooked by the Iran war or buy if they see an opportunity. “When the war broke out, and you have certain a certain market view, such as buying into the Singapore market, you will be able to just trade STI ETF immediately, or if you wanted to sell away your US ETF,” she adds.
Through both active and but more often passive management, ETFs can offer cost-effective exposure to nearly every asset class, from core US equities to complex emerging market debt. As a result of this democratisation, a wide range of investors can now access hard-to-reach markets once only available to the largest institutions.
She shares there is strong participation in the ES3 from retail investors, with strong demand from CPF and SRS monies. She adds: “institutional clients always look ahead. They want to allocate more to Singapore and use ETFs as the tactical allocation. This year has seen a clear pickup in institutional demand, with the ES3 increasingly used to express views on the Singapore market.”
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Diversification does not ensure a profit or guarantee against loss.
Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs.
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[1] Source: Bloomberg Finance L.P., as of 31 March 2026
