In this article, I examine the opportunities driving the momentum, assess key risks that investors should look out for, and share how Singapore investments play a role in my own portfolio.
What’s driving the STI’s growth?
If you’re like most Singaporeans, chances are that an exchange-traded fund (ETF) tracking the Straits Times Index (STI) was likely your first investment foray into the markets.
It is local, familiar to us, and often seen as a safe, slow-and-steady option to build our long-term wealth.
But with the STI recently hitting a multi-year high, I know many people are wondering: “Should I still buy in now? Or have I missed the boat?”
To figure this out, we need to first understand what’s driving the STI ‘s growth in recent years.
Strong economic growth
A stock market can often be seen as a barometer for the country’s economy. In 2023, I wrote that investors wanting to ride on Singapore’s economic growth can check out STI ETFs for their portfolio.
That thesis has played out perfectly. Singapore’s GDP surged over 50% in the past 4 years since COVID hit, and our political stability and diversified economy continue to make Singapore a safe haven for businesses and investors.
A robust financial sector
Thanks to the rising interest rate environment, net interest margins (NIMs) have expanded for our local banks, translating into record profits and generous dividends. In fact, if you’ve held onto Singapore bank stocks in the last 2 years like I have, you’ve probably smiled at your dividend payouts.
As the STI is weighted by market capitalisation, the growth in Singapore’s 3 biggest banks has pushed the index higher, and DBS, OCBC and UOB combined now accounts for slightly over 50% of the index today.
Although that might sound overly concentrated, the STI’s tech-lite nature can make it a good diversification tool for tech-heavy portfolios.
Support from the Monetary Authority of Singapore (MAS)
To revitalise the Singapore market, MAS is pouring $5 billion into efforts to improve market liquidity, attract listings, and revitalise the SGX. MAS also announced last month that its efforts will include helping companies improve their investor communications, fostering greater investor confidence and better share price performance.
With strong government support, this is a long-term catalyst that bodes well for anyone investing in the STI today. In my opinion, barring an economic crisis, I believe that the general long-term trend is up.
Strong, defensive plays
The STI has plenty of blue-chip stocks that are relatively resilient in times of global uncertainty. From REITs to transport to telcos, the STI is filled with companies providing essential services.
During volatile global periods, investors tend to rotate into these “defensive” plays – further strengthening the STI’s appeal.
High dividend yields
If you didn’t already know, based on the average dividend yield across the last 10 years, the STI offers one of the highest dividend yields when compared with other global market indices.
At the time of writing, the STI ETF (such as ES3 or G3B) still offers a trailing^ dividend yield of around 4%1 with the potential for capital gains. This is above the dividend yield of other major indices, such as the Hang Seng Index and the S&P 500 Index. And in the US, dividends have historically contributed to roughly a third of total market returns.
^Note: Trailing dividend yield is the annual dividends paid over the past 12 months divided by the current share price, showing how much income you’d earn per dollar invested based on historical payouts.
Another thing to note is that Singapore dividends are tax-free, while US dividends are subject to a 30% withholding tax for foreign investors. When you’re investing for the long run, that difference adds up significantly over time.
A weakening US dollar
The US dollar has fallen more than 10% in the past year on the back of ongoing tariff disputes and rising US debt levels. If you’re a Singapore-based investor, this matters because when you invest heavily in US assets, your returns will be affected by currency changes.
To put things into perspective, the S&P 500 may have gained 16% in 2025, but the weaker currency meant that Singapore investors only received single-digit returns2 after converting back to Singapore dollars. In contrast, Singapore investors who went for the STI instead received a 22% return without suffering any currency exchange losses.
If you agree with the experts who believe that the Singapore dollar could reach parity with the US dollar by 2040, then this makes a strong case for investing in our local markets.
But…what are the risks?
Of course, no investment is without risk, and even the STI is no exception.
Limited growth potential
Compared to high-growth markets like the US or China, the STI may seem relatively conservative. There’s no Apple, NVIDIA or Alibaba equivalent in our local index, so if you’re gunning for double-digit annual returns, then you may be disappointed.
However, DBS believes that the STI could still rise to nearly 10,000 points by 2040 if historical return patterns hold, as indicated in their Singapore 2040 report here.
Concentration risks
At time of writing, half of the STI is made up of just 3 banks. This means that if the financial sector takes a hit – such as due to global interest rate cuts or credit risks — investors may find their STI portfolio take a heavy hit.
Global economic slowdown
Singapore’s economy is tightly linked to global trade. As such, a slowdown in China, disruptions in global supply chains, or weaker global demand could negatively impact Singapore’s export-oriented companies.
We may feel the ripple effects, and so may the STI.
So is the STI still worth investing in?
I learned this recently from Amova Asset Management’s Head of Asian Equity, Lai Yeu Huan, who pointed out that “anyone under the age of 40 in Singapore has not really seen a Singapore markets boom. But the older investors will remember the mid-2000s and mid-1990s.”
Indeed, in the 1990s, the STI jumped by 59% in 1993 and 78% in 1999. Between 2003 to 2007, the STI grew by more than 10% every single year. Investors can check out the historical performance of the STI here:
| Year | % change in STI |
| 2003 | 31.58% |
| 2004 | 17.09% |
| 2005 | 13.61% |
| 2006 | 27.20% |
| 2007 | 16.63% |
Source: Yahoo Finance.
The STI was up by 22% last year, and has been steadily climbing so far in 2026 while the S&P 500 has remained flat. With the recent catalysts covered above, I believe there’s still more potential upside for the Singapore equities market to grow further.
As investors, we strive to build a portfolio that will not only grow for us, but allow us to sleep peacefully at night.
In my opinion, that’s why many people invest regularly in a strong foundation of market index ETFs, including that of their own country, which they may perceive as an anchor. Investing in a basket of diversified stocks can help soften the blow when one particular stock takes a hit.
If you value stability and you’re looking for exposure to Singapore’s blue-chip companies while getting a reliable stream of passive income from dividends, then the STI will still make sense today. This is especially so if you’re still building your core portfolio and investing via your CPF/SRS. But if you’re young and chasing aggressive growth, then the STI might appear less attractive than its foreign market counterparts or other growth-oriented investments.
Also, don’t forget the SGD advantage — investing in the STI means you’re not exposed to foreign exchange risk. That’s another layer of stability that’s easy to overlook.
Personally, investing in the Singapore markets have been a stable source of growth and reassurance for me, and allows me to have peace of mind while I pursue higher growth opportunities in the more volatile US and China markets.
How to invest in the STI today
You can ride on the growth of the STI by buying an ETF or a unit trust that tracks it. One popular option is the Amova Singapore STI ETF, which currently manages over $1 billion AUM of investors’ money. It is easily accessible, as you can find it available through your brokerage accounts and even use it for investing with your CPF or SRS funds.
It also has a low total expense ratio (TER), capped at 0.25% p.a.. This means that for every $100 dollars you invest, your costs are no more than $0.25. This makes the Amova Singapore STI ETF a great way to get exposure while keeping your costs minimal.
Sponsored Message: Advancing Singapore Equity Market
Amova Asset Management Asia has been appointed by the Monetary Authority of Singapore (MAS) to manage a Singapore equity portfolio under the Equity Market Development Programme (EQDP), an initiative to deepen liquidity, strengthen research, and boost investor confidence. Building on nearly four decades of leadership, we remain committed to advancing Singapore’s equity market.
Conclusion
The Amova Singapore STI ETF offers investors an opportunity to build a diversified portfolio of Singapore stocks in a simple and low-cost way.
What’s even better is that they’re now launching a new accumulation share class, which makes it perfect for investors who want their dividends3 to be automatically reinvested for them. This will also be eligible for investing with your CPF funds.
- Note that past dividend yields are not indicative of future dividend yields. ↩︎
- Using a 1.37 USD-SGD exchange rate at the start of 2025 vs. a 1.28 USD-SGD exchange rate at year end. A US$10,000 investment would have cost the Singapore-based investor more than S$13,700 to fund at the start of 2025 (using USD-SGD rate of 1.37), growing to US$11,600 by year-end and converting back for S$14,848 (at USD-SGD rate of 1.28). The total return on capital hence stands at 8.4%. ↩︎
- Distributions are not guaranteed and are at the absolute discretion of the Manager. Any distribution is expected to result in an immediate reduction of the Fund’s NAV. Distributions may be paid out of capital which will result in capital erosion and reduction in the Fund’s NAV, which will be reflected in the redemption price of the Units. ↩︎
Disclosure: This post is brought to you in collaboration with Amova Asset Management. All research and opinions are that of my own, and should not be taken as financial advice for your specific situation(s) as I know nothing about your individual financial circumstances, risk tolerance or investment objectives. I highly recommend that you use this as a starting point to understand more about Amova’s STI ETFs – including their accumulating and distributing class - which you can use for cash, CPF or SRS investing. Be sure to click into the respective links above to retrieve the fund prospectus and performance so as to help you decide whether it fits into your investment objectives.
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