10 STI New Entrants Averaged 9% 5-Year Annualised Total Returns

Since 2014, the STI has seen as many as 5 new companies and 5 REITs join the Index, attributed to increased STI liquidity requirements and comparatively strong performances of the global REIT Sector. Another 2 stocks, Jardine Matheson & Jardine Strategic re-joined the STI in 2016 and 2017.
Together the 10 new entrants have averaged 8.8% annualised 5-year total returns (median 9.9%) through to the end of July 2020. Similarly, the 10 new entrants averaged annualised 10-year total returns of 9.3% (median also 9.9%), with Mapletree Commercial Trust and Mapletree Industrial Trust total returns from respective IPO dates.
The STI Reserve List - Keppel DC REIT, Frasers Logistics & Commercial Trust, NetLink NBN Trust, Keppel REIT and Suntec REIT are used in the event that one or more of the STI constituents are deleted during the period up to the next quarterly review. NetLink NBN Trust & Frasers Logistics & Commercial Trust listed within the last 5 years.

Regional Indices Driven by Sector Impacts in 2020

The past five years have seen both the Bank and Real Estate Sector heavy Straits Times Index (“STI’) and FTSE ASEAN All-Share Index both generate marginal declines in annualised total returns over the past five years at 1.2% and 1.4% respectively. Much of the declines are due to the first seven months of 2020, as the STI had generated 6.7% annualised total returns from the end of 2015 through to the end of 2019, with the regional FTSE ASEAN All-Share Index generating annualised total returns of 4.7%.

Regional Index declines have been largely global sector driven.

The median decline of the top quartile of global bank stocks by market value was 21.9% over the first seven months of 2020, with a decline of 12.4% for the top quartile of global real estate stocks. These sectoral declines have had a more limited impact on the S&P 500 Index with the two key sectors accounting for less than 10% of the Index weight. Together, the Bank and Real Estate Sectors make up more than 50% of the STI weights and close to 40% of the FTSE ASEAN All-Share Index.

New STI Real Estate Plays All Outpaced Global Peers Over Past 5 Years

While Singapore banks have a long heritage of operation and listing history, more than half of the 10 newest stocks to join the STI represent the Real Estate sector, with UOL Group, and 5 REITs – Ascendas REIT, CapitaLand Commercial Trust, Mapletree Commercial Trust, Mapletree Logistics Trust and Mapletree Industrial Trust. All six stocks generated gains over the past five years, averaging 13.6% annualised total returns, whilst the top quartile of global Real Estate stocks by market value averaged annualised total returns of 2.7%. While UOL Group was the least performing of the six Real Estate stocks for the five year period, its 2.0% annualised total return still beat the 0.5% median total return of the non-REIT contingent of the top quartile of global Real Estate stocks by market value.

One Third of Current Constituents Joined the STI since 2014

Of the current 30 STI constituents, 10 of the stocks have joined since June 2014. Three of these stocks joined in 2015 when the liquidity requirement for STI inclusion was enhanced. New entrants included SATS, UOL Group and Yangzijiang Shipbuilding. This also saw Jardine Matheson Holdings and Jardine Strategic Holdings omitted from the Index, however subsequent increased trading activity saw these two stocks rejoin the Index in 2016 and 2017.

As discussed above, there has been much alignment of global stock sectors in the first seven months of 2020. For instance, SATS has generated an annualised decline of 4% in total return for the 5 year period ending July 2020. This was primarily due to the declines of Airline stocks in the first seven months of 2020, with the more than 100 global Airline stocks generating a median decline of 35.8%. Between 2015 and the end of 2019, SATS had generated 11% average annualised total returns.

The average annalised total returns of the 10 new entrants are tabled below. Note the 10 year average annualised total returns of both Mapletree Commercial Trust and Mapletree Industrial Trust are taken from their respective IPO dates.

STI's 10 Newest Entrants

Together the 10 new entrants have averaged 8.8% annualised 5-year total returns through to the end of July 2020. Similarly, the 10 new entrants averaged 10 year annualised total returns of 9.3% with Mapletree Commercial Trust and Mapletree Industrial Trust total returns from respective IPO dates. The median annualised total returns for both the five year and 10 year period were both 9.9%.

The majority of the 10 stocks have also represent yield plays over the past 5 years, reiterating the investor appetitive for dividend and distribution income in Singapore. As discussed here, Singapore stocks maintain the highest dividend yields across Asia. Singapore stocks also account for 0.68% of the FTSE All-World High Dividend Yield Index, double the 0.34% weight that Singapore stocks maintain in the FTSE All-World Index. Note that the FTSE All-World High Dividend Yield Index does not include stocks categorised to the ICB Real Estate Investment Trust (REIT) Sector.

Current STI Reserve List

The STI Reserve List is used in the event that one or more of the STI constituents are deleted during the period up to the next quarterly review. The 5 stocks are Keppel DC REIT, Frasers Logistics & Commercial Trust, NetLink NBN Trust, Keppel REIT and Suntec REIT. With a market value of S$4.7 billion, Frasers Logistics & Commercial Trust propelled itself into the STI Reserve List following the completion of the merger of Frasers Logistics & Industrial Trust and Frasers Commercial Trust.

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