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) Constituent Weightage (%)
DBS Group Holdings Ltd 14.8%
OCBC Bank 11.1%
UOB Bank 10.0%
Singtel 8.3%
Jardine Matheson 6.4%
Keppel Corporation 4.0%
Singapore Exchange Limited 3.9%
Capitaland Limited 3.7%
Ascendas REIT 3.1%
Jardine Strategic 2.8%
HongKong Land 2.6%
Wilmar International 2.5%
Capitaland Commercial Trust 2.3%
Mapletree Commercial Trust 2.2%
Capitaland Trust 2.0%
Singapore Tech Engineering 2.0%
Venture Corporation 1.7%
Thai Beverage 1.7%
UOL Group Limited 1.7%
Mapletree Logistics Trust 1.7%
Genting Singapore 1.5%
Singapore Airlines 1.5%
City Developments 1.3%
ComfortDelgro 1.3%
Singapore Press Holdings 1.2%
Yangzijiang 1.1%
SATS 1.1%
Sembcorp Industries 0.9%
Jardine Cycle and Carriage 0.9%
Dairy Farm International 0.8%

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.

2019 2018 2017 2016 2015
Dividend Paid (cents) 12 11.3 10.1 9.3 9.7

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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