Should You Buy Into Straits Times Index During A Crisis?

Should You Buy Into Straits Times Index During A Crisis?

At volatile times like this whereby the world wide stock market crashes multiple times within a month, it just confuses investors like me on which company to buy into given that we have limited cash in our war chest to deploy. Every stock or company that is listed looks attractive now.

During the Lehman Brothers financial crisis in the year 2008, I have bought STI ETF that tracks the Straits Times Index (STI) at 2,500 level. At that period of time, the Straits Times Index fell as low as 1,594 in the year 2009. When the economy starts recovering, I sold off STI ETF when the Straits Times Index (STI) was at 2,600 for fear that it will plunge again. I was an inexperienced investor at that point in time. The Straits Times Index (STI) recovered to reach above 3,500 level.

We all know that the stock market has crashed. At the current COVID-19 situation, the Straits Times Index closed at 2,410.74 on Friday, 20th March 2020.

Should I buy into the Straits Times Index again?

Should You Buy Into Straits Times Index During A Crisis?

Straits Times Index (STI) Constituent

The Straits Times Index (STI) comprises of the largest 30 companies in terms of market capitalisation. Below are the list of companies and their weightage in the Straits Times Index (STI).

Straits Times Index (STI) ConstituentWeightage (%)
DBS Group Holdings Ltd14.8%
OCBC Bank11.1%
UOB Bank10.0%
Singtel8.3%
Jardine Matheson6.4%
Keppel Corporation4.0%
Singapore Exchange Limited3.9%
Capitaland Limited3.7%
Ascendas REIT3.1%
Jardine Strategic2.8%
HongKong Land2.6%
Wilmar International2.5%
Capitaland Commercial Trust2.3%
Mapletree Commercial Trust2.2%
Capitaland Trust2.0%
Singapore Tech Engineering2.0%
Venture Corporation1.7%
Thai Beverage1.7%
UOL Group Limited1.7%
Mapletree Logistics Trust1.7%
Genting Singapore1.5%
Singapore Airlines1.5%
City Developments1.3%
ComfortDelgro1.3%
Singapore Press Holdings1.2%
Yangzijiang1.1%
SATS1.1%
Sembcorp Industries0.9%
Jardine Cycle and Carriage0.9%
Dairy Farm International0.8%

Dividend

One of the factors that most people buy into the index is because they did not know which company to buy into. It is good for novice investors who do not know how to analyze the financials of a company. The second factor why the STI ETF is a good stock is because it pay out consistent dividends but it was deemed unattractive because of the low dividend yield when the stock market as at all time high above 3,000 levels.

The STI ETF has been consistently paying out dividends over the past 5 years.

20192018201720162015
Dividend Paid (cents)1211.310.19.39.7

Now the stock market has crashed, let us take a look at the current dividend yield.

Based on FY19 dividend payout of 12 cents and STI ETF current price of S$2.43, this gives us a current dividend yield of 4.94%. Of course we must be cautious that dividends may be cut this year and thus the dividend yield may be reduced. However, when the market recovers in the long run, the dividend payout will recover.

Summary

If you do not know which stock to buy now and wants to take opportunity of the current crisis where the stock market is cheap, perhaps you can check out STI ETF.

One thought to “Should You Buy Into Straits Times Index During A Crisis?”

  1. Hello, I have been following yr blog regularly. Would appreciated yr assessment/comments on First Reit which is in Health care area. You are holding Parkway Life. Thks.

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