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is sti an inaccurate index?
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ten4one
Master |
10-Aug-2006 07:32
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Yes DanielXX the STI is just an indicator and may not reflect the true state of an economy. More over it is more a forward-looking index as it has direct link to the pricings of the indexed-stocks and of course, not forgeting the human factors that could move mountain. As you've mentioned, some pricings of companies may not have factored in the facts or the actual financial numbers and thus created a 'biased' index that favors the main Players. Facts are based on things that have actually happened. STI is an forward-looking index indicating the direction of the economy based on forecasts. More over, anything done at random cannot be factual - and that's a fact! Cheers!!!! |
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DanielXX
Member |
09-Aug-2006 12:00
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The STI index is probably useful as a leading indicator of the general economy since it consists of all the main drivers of the economy. Some of them are rather irrelevant: the Jardine group of companies for example. Some are interlinked and tightly held --- Haw Par & UOL for example. It's a common benchmark that fund managers use, because they invest in large-cap stocks. On a sidenote, the UOB Sesdaq index was meant to track small caps, but to me it looks increasingly irrelevant. Small caps that attain a certain degree of growth and stability get upgraded to the Mainboard. What remains are the languishing, thinly traded ones. No wonder the index has remained stagnant from 1993 till today (still at ~100!). |
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teeth53
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09-Aug-2006 11:58
Yells: "don't learn through life, learn to grow with life " |
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I merely stated the fact, the true thing what can happen in sti the true that happened (that facts) and what it reflected and it does not reflect the truth numbers. |
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teeth53
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09-Aug-2006 11:32
Yells: "don't learn through life, learn to grow with life " |
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In fact it mean thing that has happened or been done at that points in time (buy/sell or hold) and it reflecting the true figures and not the truth in itself co's whatever fact did happened it is alway and often half truth., so it doesn't reflect the t....... numbers, have a nice NDP holiday. |
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ten4one
Master |
09-Aug-2006 09:33
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Hi teeth53, STI maybe accurate in reflecting figures (or numbers), but certainly not facts. There is no truth in your very confusing statements - sorry to say so...cheers!!!!! |
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teeth53
Supreme |
08-Aug-2006 18:50
Yells: "don't learn through life, learn to grow with life " |
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It is only accurate in facts and figures, reflecting the true numbers and does not reflecting the truth numbers. |
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ten4one
Master |
08-Aug-2006 10:05
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STI is only accurate to reflect the trading activities at that 'moment' and most of the times it is done at random. Definitely it doesn't represnt the current values of the Market as it is always forward looking. It is fair to say it does represent what the Market 'thinks' going forward. Cheers! |
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teeth53
Supreme |
08-Aug-2006 09:20
Yells: "don't learn through life, learn to grow with life " |
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Is sti an inaccrurate index ?. It all depended on U as they is no yard sticks to measure but can take it as a guide and not a reference. |
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clauswu
Member |
07-Aug-2006 16:57
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Thanks for the feedback regarding the total return option that is obviosuly done for some overseas indices. As mentioned before I am not aware that such a calculation exists for STI. Probably in the past not much emphasis was paid on dividend payments. Net TR might be difficult to calculate in Singapore as dividends are, at present, ultimately taxed at the marginal personal income tax rate which varies among individuals. |
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klooloola
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07-Aug-2006 16:49
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The whole point of indexes is to show you not the price performance but total returns of the "entire market" that is the sum of all businesses at their going price with dividends reinvested. My opinion is that if a index doesnt reinvest dividends then it is useless. Notably if a stock goes ex dividend , the index price falls, but the owner of the stock and the owner of all the shares in the index has lost no money as he has received dividends usually exactly equal to the drop in price. Most indices now give a "total return option" in addition to the old one see http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/Page/IndicesIndexPg&r=1&b=4&s=6&ig=48&i=56 click on TR and Net TR (net tr allows for tax on dividends) Anyway to summarise my best option seems to be to ignore STI and use the STI ETF that includes divdends instead. |
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clauswu
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07-Aug-2006 16:05
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Most ETFs cannot track their respective indices 100% because they would need a lot of money to do so. Otherwise odd numbers of shares of individual companies have to be rounded up or down to the next tradeable lot. They ususally also don't pay dividends but reinvest such income. ETFs have other costs (annual management fee [0.1-0.3%], trading costs in case of re-shuffling of index) therefore their returns might be lower than the index in some cases. I am not aware of any "total return" benchmark as you define it. |
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klooloola
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07-Aug-2006 13:23
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So what then is the appropriate "TOTAL RETURN" benchmark to use to judge the investment performance of a mutual fond or your own investments . Shall I use the streettracks ETF or the powershares ETF? |
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klooloola
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07-Aug-2006 13:07
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So my worst fears are confirmed. The STI is worthless form the view of a value investor as it doesnt measure total return. Next time you hear some fund manager claim he has beaten the STI , you should laugh. Any idiot holding the tocks in sti can beat the sti with dividends reinvested. Looks like i will have to track my investment performance against the streettracks STI ETF and not the STI. Now i am off to reserach of the published prices of the ETF are total returns of does the etf pay dividends too inwhich case my calculation become even more difficult. What about the other etf ? the isshares MSCI etf is that more accurate or does that also skew things by not reinvesting dividends? |
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clauswu
Member |
07-Aug-2006 12:35
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Neither STI (or any other index like DOW, NASDAQ) include reinvested dividends. They are purely a reflection of the prices of the stocks (with different weighting) that are part of that index. |
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klooloola
Member |
07-Aug-2006 12:16
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What i need to know is does STI reinvest dividends if the answer is "no" then I can safley ignore it - as it is worthless from the point of view of a fundamental investor and measure my performance against the street tracks ETF instead. |
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klooloola
Member |
07-Aug-2006 12:01
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What i meant is that if the STI does not reinvest dividends then it is dangerously inaccurate. Any idiaot holding the STI stocks will outoperform the index and then claim to be a great fund manager see for example --- http://www.sgx.com/psv/securities/etf/ETF_Straits_Times.shtml the street tracks etf is doing far far better than the STI index in one year it returned 17.99% vs its bennch mark of 13.61% Is it because dividends are not included in calculations the benchmark ? Sorry if have to keep posting these blank messages, something goes wrong when i post from firefox |
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klooloola
Member |
07-Aug-2006 11:57
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tanglinboy
Elite |
07-Aug-2006 11:46
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good question... the STI is just a an index that contains that the "experts" deem as representative of the Singapore market as a whole. If for exmple Singtel suddenly shoots up for some reason, the STI will similarly be affected just because of one stock. so... its not perfect, I guess. |
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klooloola
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07-Aug-2006 11:43
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