Lately there have been some people who asked me on the investment for STI ETF. Thus I thought it will be good for me to write on this issue.
STI ETF represents Straits Times Index Exchange Traded Fund and currently there are 2 providers DBS and streettracks who managed these funds. ETF in short stands for Exchange Traded Fund which tracks the index but can be traded like a stock through the broker.
StreetTracks will be preferred as the liquidity is higher than DBS but do bear in mind that the ETFs listed on the SGX are pretty illiquid as compared to those listed in the US.
“STI ETF” from Streettracks has been listed on SGX since 17 April 2002 and it is managed by the investment management division named State Street Global Advisors Singapore Limited.
See their link here: http://www.streettracks.com.sg/ssga/jsp/en/index.jsp.
We have understood from CIMB that there is no additional fee for trading this fund listed on Singapore exchange but normal brokerage fee such as 0.25% still applies.
Advantages of ETF
1) ETFs offer stability in numbers. They have more diversification due to they are a basket of stocks rather than one individual stock.
2) Their performance can be easily tracked using the STI index
3) Not easily affected by news related to specific company or sector.
4) The prices of the ETF will not fall after XD due to ETF tracks the index.
5) Do not need to learn on how to read individual company balance sheet or understand what the company is doing.
6) There will be half yearly review by experts on STI companies to determine the “best 30 companies” to remain in the index.
7) Can be easily traded throughout the markets hours unlike unit trust.
8) Do not have management and operating expenses unlike unit trust
Disadvantages of ETF
1) Illiquidity
2) Unable to track index completely during intraday. (In fact we take advantage if you know what to do)
STI ETF prices is normally about 3 cents above the index which means STI = 2970 = $3 with average trading volume per day = 0.2 million.
As far as we can see, STI ETF tracks the index very well based on the performance chart comparison between STI and its ETF.
Not willing to put your savings in bank for that tiny 0.2% interest rate but lack of knowledge or time to trade in individual companies or sector?
Angry over that the stocks that you are holding are not moving even though STI rally?
Then STI ETF will be for you!!
Will be covering on how to trade foreign ETF such DOW or S & P 500 in the next few weeks but appreciate any feedback or questions on STI ETF so that we can improve on our next ETF articles.
Hi Dou,
Your indication that STI ETF is illiquid, does this mean that it is difficult to sell as there could be no ready buyer? Wld this mean that despite its good performance in an uptrend, it is risky to buy the counter as one may find it difficult to sell? Why would this counter be illiquid when it is an uptrending counter which can result not only from price action but also volume surge?
Hope to get clarification as I am interested in investing in STI ETF. Thanks in advance for your help.
Regards,
Helen