What is STI ETF?

This post is part of a series of posts that discuss about the STI ETF in detail. To access the other posts in this series, click here

A lot of people have often asked me during discussions on investment on what exactly is STI ETF when I tried to introduce them to it. Quite a few of them also seems to think that STI ETF is SGX which is the counter that represents the Singapore Exchange so I thought it will be good for me to write on this issue.

STI ETF stands for Straits Times Index Exchange Traded Fund and it is managed by State Street Global Advisors (SSgA). It has been listed on SGX since 17 April 2002. I am sure the Straits Times Index is familiar to most of us since it is an indication on the performance of the stocks in Singapore generally. But what is an Exchange Traded Fund ? ETF in short for Exchange Traded Fund, is a fund that tracks the index but can be traded like a stock. Thus STI ETF is a fund that tracks the Straits Times Index but can be traded like a stock on the Singapore Exchange.

Let me give an example of how STI ETF follows the STI. For example, at this point of time, STI is at 1711.13. This can be found on the main page of SGX where I have highlighted it with a red rectangular box.

Thus the STI ETF should be trading at a level of 1711.13 divided by 1000 which will give a price of around $1.71. At this point of time, the price of STI ETF is at $1.76 which can be seen in the picture below. I have also highlighted STI ETF and it's price with a red rectangular box.

Now some of you may ask how come the price of STI ETF is at $1.76 instead of $1.71 since STI is at 1711.13. This is because STI ETF does not really track STI exactly although it will try to track STI as closely as possible. It usually trades at a price slightly higher than the STI by a range of around 5 to 10 cents more but it is not really a cause of worry.

I will be touching the advantages of buying STI ETF as compared to stocks and unit trusts and perhaps some points one should take note when one buys the STI ETF in subsequent posts.

If you wish to find out about the STI ETF, the URL is here. The prospectus and the NAV per share can also be found at the link.