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ETFs

Which Singapore ETFs to buy? Beansprout's complete analysis of top 10 ETFs

01 Aug 2022

Have you ever wondered which Singapore ETFs you should buy? Read on to learn more about some of the different Singapore ETFs to buy.

Singapore ETFs To Buy

What you'll learn:

  • What is the STI ETF?
  • How has the STI performed?
  • Which STI ETF should you buy?

TL;DR

  • The Straits Times Index (STI) is made up of the top 30 companies listed on the SGX across different sectors
  • As the benchmark for the Singapore stock market, the STI has recorded an annualised return of 5.3% in the past 10 years
  • The SPDR and Nikko AM STI ETFs have generated broadly similar returns in the past 12 months.

What is the STI ETF?

Many new investors often wonder what is a good Singapore ETF to buy. You can start by understanding what the Straits Times Index (STI) is.

The STI comprises the 30 largest and top-performing companies listed on the Singapore Exchange (SGX). Just like how the S&P500 index is used as a benchmark for the US stock market, the STI is widely used as a benchmark for the Singapore stock market.

If you buy the SPDR STI ETF, for example, you’re essentially investing in an exchange-traded fund (ETF) that tracks the performance of the index. This exposes you to a variety of stocks across different sectors and industries in Singapore.

STI composition

The financial sector makes up a sizeable portion of the index. This is because the big three banks in Singapore (DBS, UOB, and OCBC) constitute the highest weightage in the STI ETF, comprising over 47% of the index.

The top 10 holdings in the STI ETF are listed in the table below:

 CompanySectorWeightage
1.DBS Group Holdings LtdFinancials20.19%
2.Oversea-Chinese Banking Corporation LimitedFinancials14.24%
3.United Overseas Bank Ltd. (Singapore)Financials12.86%
4.Singapore Telecommunications LimitedTelecommunications5.96%
5.Jardine Matheson Holdings LimitedIndustrials5.09%
6.CapitaLand and Integrated Commercial TrustReal Estate3.14%
7.Wilmar International LimitedConsumer Staples3.02%
8.Ascendas Real Estate Investment TrustReal Estate2.97%
9.CapitaLand Investment LimitedReal Estate2.95%
10.Hongkong Land Holdings LimitedReal Estate2.71%

Source: SPDR company data

How has the STI performed historically?

The performance of the STI has varied results across different time periods. Most notably, it boasted an impressive 13.6% return within the past year in the wake of the COVID-19 economic recovery. On average, the STI has seen an annualised return of about 4% to 5% across a 3-year, 5-year and 10-year time period.

STI performance

Interested to know which Singapore ETFs to buy? Read on!

Should I buy the SPDR STI ETF or Nikko AM STI ETF?

There are two ETFs that track the performance of the STI. Both the SPDR STI ETF and the Nikko AM STI ETF provide ways to invest in the top 30 companies on the SGX. Although both ETFs serve to track the performance of the STI, there are a few considerations to look at.

a. Performance

In terms of performance, both the ETFs generated a return of 15.2% in the past 12 months (as of January 2022). This is slightly below the return of the STI, which was at 15.7%. This is likely due to differences in fees and tracking errors.

Across the longer time horizon of 3 years and 5 years, the returns of the SPDR STI ETF have been higher than that of the Nikko AM STI ETF.

SPDR vs Nikko

b. Total expense ratio

Both the SPDR STI ETF and the Nikko AM STI ETF charge the same total expense ratio (TER) of 0.30% per annum. The TER measures the total costs associated with the overall management and operating expenses of the ETF. This may include management fees, administrative costs, as well as distribution fees.

c. Tracking error

Tracking error refers to the difference between the price of the benchmark fund (in this case the two ETFs) and the index it is trying to track.

On this front, the SPDR STI ETF has a slightly lower tracking error. According to their respective fact sheets, the SPDR STI ETF has a tracking error of 0.03% while the Nikko AM STI ETF has a tracking error of 0.15%.

d. Track record

Both ETFs are run by established fund managers. The SPDR STI ETF is managed by State Street Global Advisors with more than US$4 trillion worth of assets. The Nikko AM STI ETF is managed by Nikko Asset Management which manages more than US$280 billion worth of assets.

As the oldest local ETF in Singapore, the SPDR STI ETF has been in existence since 2002. The Nikko AM STI ETF, on the other hand, was listed on the SGX in 2009.