How to Invest in Singapore

Singapore is major international financial center – and seems predestined as a destination for investments. This moneyland.ch guide explains how you can invest in the Singaporean stock market, and answers important questions.

What makes Singapore interesting for Swiss investors?

Investing in Singapore is a way to participate in what has, so far, been an exceptional success story. The country – along with Hong Kong, South Korea, and Taiwan – is one of the Four Asian Tigers. These are countries in Asia that developed very quickly in the second half of the twentieth century. In terms of gross domestic product adjusted for purchasing power, Singapore is the third most affluent country in the world – ahead of Switzerland, which holds fifth place (as per 2022 figures). According to the Global Financial Centres Index 2023, the city-state is the world’s third most important financial center, after New York City and London.

Which indexes track the Singaporean stock market?

The Straits Times Index is considered to be the main Singaporean stock index. It tracks the 30 stocks with the highest market capitalization on the Singapore Exchange. The index is published by Singaporean newspaper The Straits Times in collaboration with the British financial services provider FTSE – which also publishes the main British stock index FTSE 100 and a number of global indexes like the FTSE All-World index.

The Straits Times Index reflects the exorbitant significance of the banking sector. More than half of the index is composed of the stocks of financial service providers.

That is a disadvantage for investors who value diversification. The disproportionate presence of the financial sector means your investment is heavily exposed to fluctuations in that one sector. In terms of the number of stocks included, the index is hardly diversified, because broad diversification is not possible with just 30 stocks. Compared to other indexes, the Straits Times Index includes more stocks than the Swiss SMI (20 stocks), but much fewer than the American S&P 500 index (500 stocks) and Japan’s Nikkei-225 index (225 stocks).

Table 1: The ten stocks with the heaviest weighting in the Straits Times Index

Date of publishing: July 31, 2024. Date recorded by moneyland.ch: August 23, 2024. Source: FTSE.

The MSCI Singapore is another index that tracks the Singaporean stock market. Like the Straits Times Index, the MSCI Singapore serves as the basis for exchange-traded funds (ETFs), which means it is possible to invest in it. The most heavily weighted stocks are identical in both indexes. But the MSCI Singapore only includes 16 different stocks, so it is even less diversified than the Straits Times Index (as per August, 2024).

Can I invest in Singapore’s stock market using ETFs?

Yes, there are a number of ETFs that invest with the aim of replicating the performance of Singaporean stock indexes (see Table 2). You can buy or sell shares in both ETFs and individual stocks at any time during trading hours. All you need in order do that is a stock brokerage account. Pay attention to the fees charged: Brokerage fees and custody fees vary between banks. Swiss stamp duties, on the other hand, are identical no matter which Swiss bank you use.  

It is important to note that not all Swiss banks let you trade on the Singapore Exchange. You can use the filter provided in the interactive online trading comparison on moneyland.ch to limit results to accounts that let you invest in stocks and ETFs listed on the Singapore Exchange.

Which ETFs can I use to invest in Singaporean stocks?

If you prefer not to invest in individual stocks, you can invest in an ETF that, in turn, invests in a whole portfolio of Singaporean stocks (see Table 2). These ETFs aim to replicate the performance of an index by investing in the stocks that make up the index.

Table 2: A selection of ETFs that replicate Singaporean stock market indexes, sorted by TER (fund fees)

Date: August 23, 2024. Sources: Justetf.com and fund managers.

What are the risks for investors?

As a general rule, investing in stocks and other securities always comes with risks. Profits are never guaranteed, and losses can never be ruled out. The risk is higher when you invest in just a few individual stocks. You can greatly reduce the risk of long-term losses by spreading out your investment capital over a broad portfolio of stocks – using an ETF or index fund, for example. The main requirement is that you hold on to your investments for a long period of time.

Investing in Singapore comes with additional risks:

• The heavy weighting of the financial sector: Financial services providers dominate Singapore’s main stock index, meaning investors are heavily exposed to this one industry sector. A weakening of bank stocks would take a disproportionate toll on the entire Singaporean stock market.
• Strong dependence on global trade: Singapore has an exceptionally globalized economy that is deeply integrated into international trade relations. Negative developments in the global economy could have a strong impact on the country’s economy, and subsequently investors.
• Currency exchange risk: Singaporean stocks are quoted in Singapore dollars. A depreciation in the value of the Singapore dollar against the Swiss franc would negatively impact returns for Swiss investors. Of course, the reverse scenario is also possible.

How well do Singaporean stocks perform?

A performance comparison shows that between 2015 and 2024, ETFs based on Switzerland’s SMI have delivered higher returns in Swiss francs than ETFs based on the MSCI Singapore. But it is important to bear in mind that performance can differ greatly between different periods of time. Past performance is never a sure indicator of future performance.

Table 3: Performance comparison of SMI and MSCI Singapore ETFs

Performance accounts for dividends. The performance of the UBS ETF (LU) MSCI Singapore UCITS ETF (SGD) is converted into Swiss francs. Dates used for performance calculations: August 21, 2015 and August 21, 2024. Source: Justetf.com.

Note: This article is provided for informational purposes only and should not be construed as investment advice.

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