Monday, May 15, 2017

STI at 50, GDP, HDB, Private Property Index and CPI

Draft: 2017/5/15

Source: Straits Times Article by Lorna Tan, her original article can be found online.

I read this article over the weekend, it is from Lorna Tan, editor of Straits Times Business Section.

I like this article, because it gives a lot of info from STI's history. 50-year is a long duration, with Singapore's own relatively short nation history, it is more precious to have such info.

Quick calc of annualized return on STI over 50-year is 7.2%, and for the most recent 15-year, it is 7.3%.

The benchmark index ended last week at 3,255.29 - a long way from its starting value of 100 points in 1966

During this period, the Singapore Exchange (SGX) has gone through many peaks and troughs, with the latter including the Pan-Electric crisis in 1985, the global stock market crash in 1987, the 1997 Asian financial crisis and, a decade later, the global financial crisis.

The first public mention of the index was on Jan 4, 1967

There are two ETFs tracking the STI that retail investors can invest in: the SPDR STI ETF and the Nikko AM Singapore STI ETF. The SPDR STI ETF has the longer track record, dating to April 17, 2002.

"Since inception, an investor would have received an annualised 7.3 per cent return over the past 15 years, not including dividends which are distributed on a semi-annual basis"

@copyright Straits Times

From this source and source. Singapore GDP were:

It grows 300 times(check CPI section in the later part of this blog) from 1965 to 2015(50-year), and it grows 3 times from 2000 to 2015(last 15 years).

Now to ES3 ETF:
From its inception, the annualized return is ~7+% too, just coincide with the underlying STI, whose performance in term is aligned with underlying SG GDP growth. The performance of the Fund, inclusive of dividends, is net of all charges payable upon reinvestment.. While 7% is nothing fantastic, it is much better than a savings account, a fixed deposit, a usual corporate bond return, SGS, SSB, and even OA/SA in our everyone's CPF account,  although at any one time of a shorter period, it was beaten miserably by one and many of other 'so-called-safer' investment alternatives.

Thus, for any Singaporean who still has a long time horizon before retirement, ES3 is a good investment vehicle, and I'm happily invested into it.

The statistics tells only the history, whether it is to repeat in the future, anyone's guess.

Updated: 2017/5/17
I thought to add another major asset category for comparison, HDB is almost the de facto option for most Singaporeans.

  • 2001Q4: 69.6
  • 2016Q4: 134.6
  • Nearly doubled in 15 year, ~5% annualized.

As usually, HDB flat is brought through a Loan, meaning leveraged, the return is much higher on the original capital outlay.

SG Private Property

  • 1976Q4: 9.8
  • 2001Q4: 87.6
  • 2016Q4: 137.9
  • 14 times in 40 years, ~6.8% annualized
  • Most recent 15 years, 157% increase. ~3% annualized (worse than that of HDB?)
Updated: 2017/5/18
CPI (inflation rate)
With the help from Statistics Gov, I got annual CPI percentage change, a proxy for inflation rate
  • 1962 over 1961: 0.5%
  • Over 55 years, CPI increased by ~4 times
  • Over recent 15s, CPI increased by 1.3 times
Over last nn of Years  55    15  
Average1.026 1.018 
Median1.019 1.010 
Annualized1.026 1.018 
Product (times)4.033 1.310 

Std deviation4.15%2.16%

I love my own study done in this post.

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