Does the Straits Times Index really reflect Singapore’s economy?
- Ben Tan
- Oct 10
- 2 min read
Updated: Oct 10
This article by R Sivanithy in The Business Times caught my attention.
The Straits Times Index (STI) has shifted over the decades from reflecting Singapore’s economy to serving mainly as a market benchmark.
It started in the 1960s as the Straits Times Industrials Index, tracking manufacturing-heavy names. But by 1998, it adopted market-cap weighting and liquidity rules, bringing in global giants like the Jardine group and ThaiBev, while phasing out local hotel and manufacturing companies.
Since 2008, the STI has only 30 constituents, leaving the three big banks — DBS, UOB and OCBC — as its main drivers. This raises a key question: does the STI still represent Singapore’s economy, powered largely by SMEs, hotels, and manufacturing, or just the listed market?
Hong Kong’s Hang Seng Index, for comparison, expanded and capped stock weights to better mirror its economy. For now, the STI remains more a gauge of the market than of Singapore’s real economy.
Ben’s view on whether Singapore stock market indices should represent the market or the economy.
I don’t think the STI should be expected to mirror the Singapore economy. It’s more accurate to see it as a reflection of the market. Representing an entire economy in one index is tricky, especially for an open economy like Singapore.
Most of the companies in the STI don’t just serve the local market. They’re global players with revenue streams across Asia, Europe, and even Latin America. If a company is hit in, say, LATAM, that doesn’t really say much about Singapore’s economy back home.
On top of that, the STI is heavily weighted towards a few industries — mainly the banks. If that sector faces a cyclical downturn, it doesn’t necessarily mean the broader Singapore economy is in trouble, especially if other industries are doing well.
So in my view, the STI is a decent market benchmark, but a poor mirror of the economy.