The top 10 most influential blue chips in the Straits Times Index

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The Straits Times Index is home to 30 of the largest companies in Singapore.

As such, the index is widely regarded as the market barometer for the Singapore stock market.

While there are 30 companies in total, the largest among the STI components hold more sway in the index compared to others.

Let’s take a look at which are the 10 biggest blue chips.

Company Ticker Symbol Industrial Classification Benchmark

(ICB) Subsector

Index Weight
DBS Group Holdings D05 Banks 15.3 per cent
Oversea-Chinese Banking Corporation O39 Banks 12.4 per cent
United Overseas Bank U11 Banks 10.5 per cent
Singapore Telecommunications Z74 Mobile Telecommunications 6.8 per cent
Jardine Matheson Holdings J36 Diversified Industrials 4.9 per cent
Ascendas REIT A17U Industrial and Office REITs 4.1 per cent
Wilmar International Limited F34 Food products 4.0 per cent
Singapore Exchange S68 Investment Services 3.2 per cent
CapitaLand C31 Real Estate Holding and Development 2.9 per cent
Keppel Corporation BN4 Oil Equipment and Services 3.5 per cent

Source: FTSE ST Index Series factsheet, as of Sept 30, 2020

As it stands, the top 10 companies within the Singapore index account for two-thirds of the index’s weightage, as shown in the table below.

In fact, Singapore’s three major banks, DBS Group Holdings Ltd, Oversea-Chinese Banking Corp. Limited, and United Overseas Bank Ltd, account for a whopping 38.2 per cent of the STI.

If you add the next two largest companies, namely Singapore Telecommunications Limited and Jardine Matheson Holdings, the top five companies would account for half of the index’s weight.

Blue chips, defined

Due to their size, STI component stocks are often referred to as blue chips.

Blue-chip companies are generally defined as large, well-capitalised companies with a long operating track record and a distinctive brand name.

These businesses are usually market leaders in their respective industries and have a dominant competitive edge over smaller competitors.

By buying into blue-chip companies, the implication is that you should be able to sleep well as they are supposed to offer stability and certainty.

Yet, recent events have shown that bigger is not necessarily better.

Dividends in crisis

The Covid-19 pandemic has exposed the weaknesses of some of these well-regarded companies.

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For instance, shares of Singtel sank to a 12-year low in September amid lower revenue and profits reported in its latest quarter. The plunge follows the telco’s decision to cut its final dividend from $0.107 to $0.0545 back in May.

Likewise, our three local banks have lowered their dividends after being called on by the Monetary Authority Singapore (MAS) to cap their dividend payments for this year at a maximum of 60 per cent of fiscal 2019’s total dividend per share.

In a study we recently conducted, we have found that two out of every three dividend-paying blue chips have since lowered their dividends.

It’s not all doom and gloom. At the same time, we have also found four blue chips that have managed to increase their dividends amid all the dividend gloom.

This article was first published in The Smart Investor. Disclosure: Chin Hui Leong owns shares in DBS Group, OCBC, UOB, and Singapore Exchange.