Singapore market edges out a small lead over US markets for the start of 2021!
In a pretty rare turn of events, our domestic Straits Times Index ETF (ES3) have outperformed the American Dow Jones ETF (DIA) year-to-date, which is also just the first 2 weeks of 2021, as shown below:
Source: Yahoo finance. YTD comparison. Blue is STI, Red is Dow Jones.
In an earlier post, I mentioned that the rebound for the SG market is likely to come lagged due to our lack of tech constituents. However, this also means that when traditional industries start to pick up – where ES3 is highly concentrated in – we are likely to see stronger recovery and stock rallies.
While marginal, I believe this small win here could signal better days ahead locally. Note that gains here are likely to be nothing spectacular, and chances are that ES3 is still going to underperform the US market for a 'past 1-2 year' time frame, but I believe the gap between these two markets is likely to narrow as the world slowly overcome the Covid-19 pandemic.
Source: Yahoo finance. Last 1 year comparison. Blue is STI, Red is Dow Jones.
I also strongly believe that our efforts to contain the pandemic will not go unawarded. Given the huge gap in the Covid situation right now in America versus Singapore, the difference in economic velocity will sooner or later be reflected into companies earnings, quality of life, and ultimately the stock market. They cannot provide stimulus forever, it is not a sustainable solution. There is likely to be a non-negligible impact on the stock market because of how well the Covid-19 situation is managed in Singapore.
The gap significantly widened due to the tech boom in the US markets following the pandemic, but we can see a narrowing trend moving forward. There is likely more upside to ES3 than DIA at the time of writing. Additionally, for Singaporean investors, ES3 pays out a much higher dividend yield compared to DIA (based on latest trailing data, approx. 3.78% vs 1.84%)
Fundamentals wise, the Straits Times Index also trades at a much lower PE ratio of 10* vs the Dow Jones Industrial Average of 30.58* as of writing.
Personally, while upsize potential is still very likely in the US markets, I am currently steering clear of investing more funds in it for now, given the slight overvaluations there. I am also taking this opportunity to also be shifting capital gains from the US markets to dividend-yielding stocks locally, but remember, each to his own!
Happy investing!
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