With one week remaining for 3Q22, the STI has booked a 5.5% total return for the quarter, outpacing the FTSE Developed Index’s 1.3% decline. The FTSE Developed Index declined below mid-June lows on Friday, coinciding with US interest rates expectations as hawkish as they have been all year.
The STI’s 5 largest weights – DBS, OCBC, UOB, SingTel and Jardine Matheson make up 56% of the STI weights, and have averaged 9% quarter-to-date total returns, bringing their average year-to-date total return to 10%. For the quarter-to-date, the 5 stocks have seen combined net fund inflows S$1.25 billion.
During 3Q22, all 5 stocks provided financials or business updates. The 3 banks reported S$6.0 billion in combined 2Q22 net interest income, while for its 1QFY23 (ended 30 June) SingTel updated underlying net profit increased 11%, while Jardine Matheson reported underlying profit increased 22% for 1H22 (ended 30 June).
The 2 ETFs that track the STI have also seen net inflows of S$9 million in the quarter-to-date, which currently marks the first quarter of combined inflows for the 2 ETFs since the S$33 million of inflows in 3Q21. The combined AUM of the 2 STI ETFs is currently S$2.2 billion, one-fifth of the total AUM of all SGX-listed ETFs.
On Friday, the FTSE Developed Index pushed below its mid-June lows, forming a new intra-year low for 2022, which has brought its 2022 year-to-date decline in total return to 19%. This has coincided with the outlook for the US Fed Funds Target Rate (FFTR) at the most hawkish levels seen all year, with CME FedWatch expectations currently ~25%/75% for a 50bps/75bps hike on 2 Nov, aligning with last week’s FOMC dot plot seeing the FFTR at 4.4% by end of 2022.
At the same time, smoothed global daily COVID-19 cases are currently at the lowest levels that have been reported all year.
Apart from equities, bonds and currencies have naturally been impacted by the staunch Fed Reserve stance on inflation, providing a multiplex of market drivers across Asia, particularly as China and Japan are not tightening their respective monetary policies.
In Singapore, the STI has generated a 7% total return in the 2022 year-to-date, with the 5 biggest weights of the Index averaging 10% total returns. As tabled below, the combined weight of these 5 stocks amounted to 56% as of the end of August. These 5 stocks also represent more than 40% of the day-to-day turnover of the Singapore stock market, with 4 of the 5 stocks among the 10 SGX-listed stocks with the tightest Bid/Ask spreads in terms of basis points (bps) last week.
|Top 5 Weights of STI||SGX
During 3Q22, all 5 stocks provided financials or business updates.
Together, DBS (SGX:D05), OCBC Bank (SGX:O39) and UOB (SGX:U11) rank among the five largest stocks across South East Asia by market capitalisation. Rising interest rates have provided a boost to net interest incomes (NII) of DBS, OCBC, UOB through net interest margins (NIMs). NIMs are largely determined by the average rate paid on the liabilities versus the average rate received on the assets of the banks, which contributes to NII along with growth of loan books. For the trio, 2Q22 NIMs rose 13bps y-o-y for both DBS and OCBC, and 11bps y-o-y for UOB. For the loan books, UOB and OCBC maintained loan growth of 8% y-o-y, with DBS reporting loan growth of 7% y-o-y. All three banks expect loan growth in the mid-single digits for the remainder of the year.
On 24 Aug, SingTel (SGX:Z74) reported its business update for its 1Q23 (ended 30 June). SingTel reported improved operational performance and exceptional gains from Airtel and dilution of the Group’s effective shareholding in Australia Tower Network, which led to a 11% increase in underlying net profit compared with the same period last year.
On 28 July, Jardine Matheson (SGX:J36) reported a strong improvement in the Group’s profitability in the first half compared with the same period last year, with a significantly improved performance in Southeast Asia, particularly by Astra, and a further contribution to growth from the simplification of the Group’s holding structure. Jardine Matheson Holdings recorded underlying profit of US$747 million for the period, up 22% against the prior year.
The 2 Exchange Traded Funds (ETFs) that track the STI have a seen net inflows of S$9 million in the quarter-to-date, which currently marks the first quarter of combined inflows for the two ETFs since the S$33 million of inflows in 3Q21. The combined AUM of the 2 STI ETFs is currently S$2.2 billion, one-fifth of the total AUM of all SGX-listed ETFs. Since the end of 2019, both STI ETFs have generated 10% total returns and ranked among the top 5 most traded ETF by daily averaged traded value.