The Straits Times Index (STI) has been riding a bull run, climbing past major milestones and posting some of its strongest performances in years.
Amid falling interest rates and rising geopolitical tensions, the STI’s strong showing this year highlights Singapore’s economic resilience – supported by sustained growth, robust corporate earnings, and forward-looking governance. Crossing the 4,000-point mark was not just a numerical milestone; it signaled investor confidence, resilient blue-chip performance, and a stable business environment that continues to set Singapore apart.
What Drove the Growth?
The STI’s rally has been underpinned by the outperformance of three key sectors:
Banking Giants: Banks make up a substantial portion of the STI and have delivered resilient earnings despite global headwinds. With strong balance sheets and consistent dividends, they continue to attract investor interest. While net interest margins (NIMs) have begun to compress amid falling interest rates, banks have shown strength in non-interest income segments, keeping profitability strong.
REITs Rebound: S-REITs, long favoured for their yield, faced headwinds during the rate hike cycle. With rate cuts on the horizon, however, investor appetite has returned. Lower borrowing costs improve distribution yields and asset values, boosting the sector’s appeal.
Industrials & Logistics: Companies in industrials and logistics sectors have seen strong performance over the past year, supported by a combination of trade recovery, increased global infrastructure spending , and rising demand for supply chain resilience.
Why the STI May Deserve a Spot in Your Portfolio
For income-focused investors, several reasons support long-term investment in the STI:
- Stability for Investors: Backed by well-established companies and a relatively low-volatility market, the STI provides a steady foundation for long-term portfolios.
- Dividend Strength: Even in some downturns, STI constituents – especially banks and REITs typically pay dividends.
- Supportive Market Policies: The Monetary Authority of Singapore (MAS) has continued to roll out initiatives to deepen liquidity, attract listings, and enhance research coverage — all aimed at keeping the local market relevant and investable
- Diversification from global tech: The correlation between STI and Global Technology1 has been decreasing with its large sector weights in the Banks, Real Estate and Industrials, providing diversification benefits to portfolios that may be overweight to expensive tech exposures.
1. Global Technology refers to the FTSE Global Technology Supertheme Index (USD). Source: State Street Investment Management, FTSE Russell, as at October 2025.
Dividend Power of the STI
The high-dividend yielding nature of STI offers investors consistent income. With uncertainty clouding capital gains, this “get paid while you wait” strategy could be appealing – especially to retirees or passive-income seekers.
ES3 currently offers a dividend yield of 4.11% as at 17 October 2025 (Source: State Street Investment Management), higher than:
• T-bills (<2%)
• Fixed deposits (1.5–2.4%)
• CPF Ordinary Account (2.5%)
Though T-bills and Fixed Deposits offer capital protection, they offer limited growth. The SPDR® Straits Times Index ETF (SGX: ES3) combines potentially steady payouts with long-term capital appreciation potential — particularly when dividends are reinvested.
Why Singaporeans Prefer Dividends
Dividends offer potential predictability, especially in retirement. They fit Singapore’s income-oriented investing culture and enjoy tax advantages – since most dividends to individuals in Singapore are not taxed. Reinvesting them can potentially enhance long-term returns.
How to Get Started with ES3
ES3 offers a straightforward, low-cost way to invest in Singapore’s top 30 companies.
Steps to begin:
1. Open a brokerage account.
2. Fund the account via FAST/PayNow.
3. Search for “ES3” — the SPDR Straits Times Index ETF.
4. Invest with cash or your SRS (Supplementary Retirement Scheme) funds.
Many brokerages support recurring investments – which can be ideal for dollar-cost averaging. You can start with just a few hundred dollars and build steadily over time.
What to Expect – Stay Long-Term
While short-term volatility is unavoidable, ES3 offers long-term value through:
- Semi-annual dividends
- Capital growth potential as Singapore’s economy expands
- Compounding via reinvested payouts
Instead of timing the market, investors should focus on consistent contributions and a long-term view.
The Bigger Picture – Why Singapore Still Shines
Beyond short-term market moves, ES3 represents a way to access Singapore’s largest and most established companies – firms that tend to be more resilient during uncertainty.
Exposure to Key Sectors
From banks and REITs to infrastructure players, the STI offers investors access to companies that form the backbone of Singapore’s economy. These firms have generally shown stable earnings and reliable dividend payouts over time.
Government and Policy Support
Singapore is stepping up long-term efforts to revitalise its capital markets and strengthen its position as a global financial hub. Central to this is the S$5 billion Equity Market Development Programme (EQDP), led by MAS, with the first S$1.1 billion tranche deployed to fund managers Avanda, Fullerton and JP Morgan to boost liquidity in local equities, particularly small and mid-cap stocks.
To attract more listings, the government has rolled out corporate tax rebates of up to 20% and expanded the Grant for Equity Market Singapore (GEMS) grant, which now offers higher support for IPO costs and analyst coverage. MAS is also looking at easing listing requirements, making it simpler for high-growth firms to go public.
Budget 2025 further supports innovation with a S$150 million Enterprise Compute Initiative to help businesses access and adopt advanced computing resources, such as cloud computing and artificial intelligence.
These are long-term moves – not short-term fixes – aimed at keeping Singapore relevant and competitive.
Political and Economic Stability
In an unpredictable world, Singapore’s orderly leadership transition to PM Lawrence Wong earlier this year demonstrates the clarity and consistency investors value. Stable politics, rule of law, and low corruption continue to make Singapore a trusted base for global capital.
Final Takeaway
Investing in ES3 is a simple, low-cost way to invest in Singapore’s biggest companies. With potentially steady dividends, diversification, and long-term exposure to the local market, ES3 can serve as a practical building block in a well-rounded portfolio.
Learn more about the SPDR Straits Times Index ETF (ES3).
Disclosure: This post is sponsored by State Street Investment Management but the opinions belong to the author.
State Street Global Advisors (SSGA) is now State Street Investment Management. Please go to statestreet.com/investment-management for more information.
State Street Global Advisors Singapore Limited (“SSGA”), 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501.
All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone.
The prospectus in respect of the offer of the units (the “Units”) in the SPDR® Straits Times Index ETF (the “Fund”) is available and may be obtained upon request from State Street Global Advisors Singapore Limited (“SSGA”, Company Registration number: 200002719D). Investors should read the prospectus before deciding whether to acquire Units in the Fund. The value of Units and the income accruing to such Units may fall or rise. Units in the Fund are not obligations of, deposits in, or guaranteed by, SSGA or any of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the principal amount invested. Past performance figures are not necessarily indicative of future performance of the Fund. Investors have no right to request SSGA to redeem their Units while the Units are listed. It is intended that holders of Units may only deal in their Units through trading on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing of the Units on the SGX-ST does not guarantee a liquid market for the Units.
Diversification does not ensure a profit or guarantee against loss. Past performance is not necessarily indicative of the future performance.
Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
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