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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?
  • What are Singapore REIT ETFs?
  • What is the Lion-OCBC Securities Singapore low carbon ETF?
  • What are some other ETFs listed in Singapore?

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.
  • S-REIT ETFs also offer retail investors with a way to get investment exposure to income-earning property

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.

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.

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.

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.

What About The Singapore REIT ETFs?

Since Singapore REITs were first listed on the SGX back in 2002, they have become increasingly popular. They are often regarded as a way to get investment exposure to property ranging from different sectors. This includes commercial, healthcare, hospitality, industrial, as well as retail.

The Lion-Phillip S-REIT ETF emerged as the first local ETF which allows retail investors to purchase a diversified basket of Singapore REITs. For some, this represents one of the safer Singapore ETFs to buy.

 Lion-Phillip S-REIT ETF
BenchmarkMorningstar Singapore REIT Yield Focus IndexSM
Number of Holdings29
12 Month Dividend Yield (%)4.99%
Distribution FrequencySemi-Annual
Average bid-ask spread22 bps (SGD)
Total Expense Ratio0.60% p.a.
Listing date30/10/17
Top 5 ConstituentsCapitaland Integrated Comm Trust; Frasers Centrepoint Trust; Mapletree Industrial Trust; Keppel DC REIT Unit; Ascendas Real Estate Investment Trust

Source: Lion-Phillip company data

The Lion-Phillip S-REIT ETF has returned 7.0% (as of 31 December 2020) since its inception in 2017. However, the fund has generally experienced mixed results. In 2020, the spread of the COVID-19 pandemic negatively affected the Singapore REITs market–particularly hospitality and retail REITs. As a result, the fund returned -1.8% that year. As Singapore slowly navigates her way out of the COVID-19 situation, business and income disruption may be a concern in retail investors’ minds.

Another S-REIT ETF worth taking a look at is the CSOP iEdge S-REIT Leaders ETF, which was recently listed in 2021. The objective of this fund is to track, as closely as possible, the performance of the underlying iEdge S-REIT Leaders Index.

 CSOP iEdge S-REIT Leaders Index ETF
BenchmarkiEdge S-REIT Leaders Index
Number of holdings29
12 Month Dividend Yield (%)4.65
Distribution FrequencySemi-Annual
Average bid-ask spread41 bps (SGD) 79 bps (USD)
Total Expense Ratio0.60%
Listing date18/11/21
Top 5 ConstituentsCapitaland Integrated Commercial; Ascendas Real Estate Investment Trust; Mapletree Logistics Trust; Mapletree Industrial Trust; Maple Tree Commercial Trust

As the CSOP iEdge S-REIT Leaders Index ETF was only recently set up, there is currently insufficient information to provide an indicator of the fund’s performance. However, the iEdge S-REIT Leaders Index itself averaged 9.92% annualised net total returns over a 5-year period (as of 31 December 2021).

What is noteworthy is the 10% weightage cap placed on all its constituents. This essentially prevents any single holding from having a monopoly over the fund’s performance, guaranteeing a well-diversified index. Put differently, the composition of the fund will never be dominated by any particular holding.

ETFs like the SPDR STI ETF and the Lion-Phillip S-REIT ETF are passively managed investment vehicles, but there are other mutual funds that are actively managed. 

 

How about the Lion-OCBC Securities Singapore low carbon ETF?

For those looking for Singapore ETFs to buy, there will be another option to consider from end of April onwards.

The Lion-OCBC Securities Singapore low carbon ETF is a new ETF that focuses on Singapore companies with low carbon intensity.

The ETF will track the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index, which was launched in March to track the top 50 companies by free-float market capitalisation with low carbon intensity.

According to the issuers of the ETF, this index of companies that exclude companies that have high carbon emissions or are heavily involved in fossil fuels has outperformed market benchmarks such as the STI over the 3-year, 5-year and 10-year time horizons.

How about other ETFs listed in Singapore?

Some of the other popular ETFs in Singapore include the Lion-OCBC Securities Hang Seng TEC ETF, and the SPDR Gold Trust.

The Lion-OCBC Securities Hang Seng TEC ETF provides access to a basket of 30 largest technology companies listed in Hong Kong. These companies have significant exposure to various themes in the technology sector such as cloud, e-commerce, fintech, and autonomous vehicles.

Some of the key holdings of the Lion-OCBC Securities Hang Seng TEC ETF include familiar technology names such as Alibaba, Tencent, Meituan, Xiaomi, and JD.com.

The Lion-OCBC Securities Hang Seng TEC ETF is traded in both Singapore dollars and US dollars. However, the Singapore-dollar denominated ETF has higher liquidity on average compared to the US-dollar denominated one.

Index Hang Seng TECH Index 
Currency of Account (Base Currency) Hong Kong dollars (HK$) 
Trading Currency Singapore dollars (S$), United States dollars (US$) 
SGX Code HST (S$ counter), HSS (US$ counter) 
Trading Board Lot Size 10 units 
Management Fee 0.45% per annum 
Expense Ratio Capped at 0.68% per annum for 2 years from the inception of the Fund 
Dividend Distribution Currently no intention to distribute 
Tracking error Rolling 1 Year Annualised: 0.04 (As of 31 March 2022) 

The recent flight to safety has also led to a renewed interest in investing in gold. For those who keen to buy this precious metal, one Singapore ETF to buy is the SPDR Gold Trust.

The ETF offers investors an opportunity to participate in the gold market without having to deal with the logistics of storing and insuring their gold holdings.

Like the Lion-OCBC Securities Hang Seng TEC ETF, the SPDR Gold Trust is traded in both Singapore dollars and US dollars. However, the Gold ETF denominated in US dollar has more liquidity on average compared to the Singapore-dollar denominated one.