SGX Market Updates

STI’s Recent Risk-Adjusted Returns Beat Regional Benchmarks


22 August 2017

  • The STI generated a weighted 12.7% price return in the 2017 YTD, whilst generating a weighted 180 day annualised volatility of 8.5%. This is compared to an average of 7.3% in price return for the S&P/ASX 200, Hang Seng Index and the Nikkei 225 Index, with average 180 day annualised volatility of 12.1%.

  • The STI’s 10 Industrial stocks have averaged 12.3% price returns in the 2017 YTD, marginally outpacing non-weighted average price returns of the 30 STI stocks at 12.1%. The marginal excess return came with a proportional level of added risk.

  • The STI’s Industrial stocks that generated the strongest 2017 YTD price returns, relative to their 180 day volatility, were Yangzijiang Shipbuilding, Singapore Airlines, and thirdly, with similar relative returns, ST Engineering and Jardine Matheson. The four stocks averaged a 31.8% price return in the 2017 YTD, with average 180 day volatility of 22.2%.

The simplest way to gauge the amount of risk associated with past price returns is the associated price swings or volatility. The magnitude of volatility that was generated with the price returns can be referred to as risk to return. Investors use this risk to return, in addition to comparative risk-free interest rates, to generate a risk-adjusted returns ratio, referred to as the Sharpe ratio.

Risk-adjusted returns can assist Investors in determining which stocks or sectors in the past generated the most return for the least volatility.

Comparative Return & Risk in 2017 YTD

From an Index perspective, Singapore’s Straits Times Index (STI) has led the benchmarks of Australia, Hong Kong and Japan in terms of volatility adjusted Index returns in the 2017 year through to 21 August.  The STI generated a 12.7% price return over the period, whilst generating 180 day annualised volatility of 8.5%. This compared to average SGD-adjusted price returns of 7.3% for the S&P/ASX 200, Hang Seng Index and the Nikkei 225 Index, with average 180 day annualised volatility of 12.1%.

Index Price Returns & Historical Volatility

Note these returns and volatility are in SGD and based on the respective Indices and their associated weightings.

Source: SGX & Bloomberg (Data as of 21 August 2017).

In its weighted form, the STI generated price returns of 12.7%, which was 0.6% percentage points higher than the average price return of the 30 constituents at 12.1%. Note that in its weighted form, while the STI generated 180 day historical volatility of 8.5%, the simple average 180 day historical volatility of all 30 STI stocks, was more than twice this level at 18.9%.

STI’s Industrials Sector

As many as 10 STI stocks represent the GICS® Industrials Sector, which generated average price returns of 12.3% in the 2017 year through to 21 August. These stocks represent the Capital Goods and Transportation sub-sectors.

At 12.3%, the average performance of the 10 Industrial stocks was marginally higher than the average price performances of the 30 STI constituents at 12.1%. Similarly the average 180 day historical volatility of the Industrials stocks was commensurately higher at 20.2%, compared to 18.9% on average for the 30 STI constituents.

Risk-Adjusted Rankings of STI Industrial Stocks

The three best performing stocks of the 10 Industrial stocks in the 2017 year through to 21 August were Yangzijiang Shipbuilding Holdings, Jardine Matheson Holdings and Singapore Tech Engineering.

However when adjusting these price returns for price volatility over the past 180 days, the three best performers on a risk-to-return basis were Yangzijiang Shipbuilding Holdings, Singapore Airlines, and then thirdly, similar ratios Jardine Matheson Holdings and Singapore Tech Engineering. The four stocks averaged 31.8% price returns in the 2017 YTD, with average 180 day historical volatility of 22.2%.

The 10 Industrial stocks are detailed below and sorted according to year-to-date price returns with the 180 day historical volatility as a simple divisor. To see more details on each stock in SGX StockFacts, click on the stock name.

Industrial Stocks  SGX
Price Change
180 Days
260 Days
Dividend Yield
Yangzijiang Shipbuilding Holdings BS6 6,131 1.595 95.7 36.3 36.3 2.5
Singapore Airlines C6L 12,203 10.570 9.3 15.3 14.8 1.9
Jardine Matheson Holdings J36 47,145* 65.660* 11.8 19.9 20.6 2.3
ST Engineering S63 11,101 3.560 10.2 17.3 17.2 4.2
Keppel Corp BN4 11,475 6.240 7.8 17.3 19.9 3.2
SIA Engineering Co S59 3,907 3.500 3.9 14.0 13.3 3.7
Sembcorp Industries U96 5,318 2.940 3.2 18.7 20.0 2.4
SATS S58 5,395 4.830 -0.4 17.1 19.2 3.5
Hutchison Port Holdings Trust NS8U 3,702* 0.430* -7.0 28.0 26.8 7.9
ComfortDelGro C52 4,780 2.190 -11.3 18.0 18.5 4.8
Average 12.3 20.2 20.7 3.6

*Note market capitalisation and price in USD, all performance and volatility in SGD terms. Historical Volatility gauges are based on trading days.
Source: SGX, Bloomberg & SGX StockFacts (data as of 21 August 2017)

The Industrials Sector includes the STI’s best performer in the 2017 year through to 21 August which was Yangzijiang Shipbuilding Holdings. The shipbuilder generated a 95.7% price change over the period and annualised 180 day volatility of 36.3%. While Yangzijiang Shipbuilding Holdings generated the highest returns over the period, it also generated the highest volatility.

In total, seven of the 10 stocks generated positive price returns over the period. Reinvested dividend distributions boosted that advancer to decliner ratio to nine of the 10 stocks generating positive total returns.

Did You Know?

The STI, in its weighted form, currently maintains lower historical volatility than benchmarks of other financial centres across the Asia Pacific. For the past 180 trading days historical volatility of the STI was 8.5%. A key contributing factor includes the geographical diversity of revenue associated with the 30 STI stocks.

However the simple average of the historical volatilities for each of the 30 STI stocks over the past 180 days at 18.9% is more than double the Index’s corresponding volatility of 8.5%. 

This article is provided by SGX My Gateway.

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