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Singapore Stock Market Valuation [10 Year Price-to-Book Ratio]

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Someone requested the data for stock market valuations stretching back to 2008 low so I thought I share it with everyone. Just a reference point for everyone.

Changes in composition

I was having a discussion with a friend who was commenting that the composition of the STI had changed significantly over the last decade – with the banks making up a larger percentage of the index today (upwards of 40%).

He remarked that Singtel used to make up a bigger proportion of the Straits Times Index but that the banks had really powered ahead post GFC – continually making up an ever increasing proportion of the Straits Times Index.

This might affect historical comparisons

Readers should keep in mind that weighting of the largest  constituents have changed over the years – making historical comparisons tricky. I don’t actually have the exact data for for the change in composition of the STI to come up with any definitive conclusion on this I am afraid.

Other random thoughts

I always like to joke that the best fund managers in the world are probably the index managers since they manage to out-perform most of the industry.

On a serious note – readers are sometime unaware that these indexes have a certain “active element” in that index is periodically re-weighted to better represent the underlying market is is suppose to reflect.

For example, Starhub has been replaced by Dairy Farm. This leads to some interesting behavior as ETFs or index funds that track the STI also rebalance automatically by selling Starhub and buying Dairy Farm (as they strive to maintain a low tracking error).

Unit trusts that are weighted to Singapore may or may not do so (highly likely they will since many of them are mostly closest index funds).

There are interesting studies that show that on average, stocks that are kicked out of the index out-perform whereas those that get added in under-perform.

Just food for thought.

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