STI reflects local market more than local economy

The Straits Times Index takes many of its cues from businesses in the services industry

Published Mon, Sep 21, 2020 · 09:50 PM

Singapore

THE Straits Times Index (STI) began in 1967 as the Straits Times Industrials Ordinary Share Index, which then measured the moves of 30 industrial stocks' share prices. Five years on from its base price of 100 on Dec 30, 1966, Singapore was well into its export promotion phase and the Straits Times Industrials Ordinary Share Index had reached 200.

At the time, the benchmark index was very much aligned with Singapore's industrialising economy. But both the STI and the Singapore economy have undergone major changes since; and there have been questions about whether the STI needs to change to better reflect the market and the economy, and to serve investors.

These questions are especially relevant given the growing interest in exchange-traded funds (ETFs) that track the STI. Together, the SPDR STI ETF and Nikko AM STI ETF recorded net creations of S$678 million over the first eight months of 2020. In comparison, they had recorded net creations of just S$17…