Not all spread betting companies offer the Singapore Stock Market Index, and when they do you may find it is a variant of the main STI index. That is the case for IG Index, who offer what they call the Singapore Blue Chip which at present is quoted at 322.90 – 323.90.
If you think that the Singapore Index will be going down, you might want to take a short position on this. You can take a sell bet at a price of 322.90, for, say, £18 per point. As the Singapore Blue Chip is a relatively low numerical value compared with other indices, it is okay to have a higher “per point” stake.
Say this went down to 302.65 – 303.65, and you decided that you wanted to take your profit. Your bet closes at the buying price of 303.65. Remembering that this is a short bet, you have gained the number of points between 322.90 and 303.65, which works out to 19.25 points. As you decided to stake £18 per point, your winnings amount to 19.25 times £18, which is £346.50.
Example: Shorting the Singapore Blue Chip
- Opening a Bet: Suppose the Singapore Blue Chip is quoted at 322.90–323.90, and you expect it to decline. You place a short (sell) bet at 322.90, with a stake of £18 per point.
- Closing the Bet: If the index falls to 302.65–303.65, you close the position at 303.65. The price difference is 19.25 points (322.90–303.65), yielding a profit of £346.50 (19.25 × £18).
Example: Long Position on the STI Index
- Opening a Bet: Assume the STI index is quoted at 2789.35–2794.35, and you believe it will rise. You place a buy bet at 2794.35 for £4 per point.
- Closing the Bet: If the index rises to 2854.63–2859.63, you close at 2854.63, earning 60.28 points (2854.63–2794.35). Your profit is £241.12 (60.28 × £4).
Key Considerations for Spread Betting
- Market Analysis: Research the STI and MSCI Singapore Index. Familiarize yourself with technical analysis to predict price movements.
- Volatility: The Singapore stock market exhibits significant price swings, making it suitable for spread betting.
- Stop Loss Strategy: Use strong stop-loss provisions to limit potential losses, especially during rapid market movements.
Inevitably, some of your bets will not be winners. In this case, if the index had gone up instead of down you would have had to close your bet for a loss. Say it went up to a quote of 328.27 – 329.27. When you closed your bet at 329.27, you could work out your losses in the same way.
The difference in points is 329.27 minus 322.90. The total points you lost is 6.37. At the same stake of £18, you can multiply this out and get £114.66 as your total loss.
If you bet with a spread betting provider who quotes you on the full STI Index, you might have a quote of 2789.35 – 2794.35. Say in this case that you think the index is going up, you could open a buy bet for £4 per point at 2794.35. As this index is nearly 3000, you would probably decide to keep your stake low compared to the previous example.
Imagine that that the STI goes up to 2854.63 – 2859.63. You could cash out your bet now and make a profit. If you do, the bet closes at 2854.63. Adding up how many points you have gained, 2854.63 minus 2794.35 is 60.28 points. Multiplying this out times your stake of £4 per point gives you £241.12 total profit.
Once again, you must always consider the impact of the index going in the wrong direction, and how far you will let it slide before you close your bet and cut your losses. Perhaps your spread betting company will quote you 2771.60 – 2776.60, and you will realize that this bet is not going to succeed, and close it.
One of the hard parts of financial trading is realizing that a proportion of your bets will lose, and there’s nothing you can do about it. In this case you have lost 2794.35-2771.60, which is 22.75 points. That means you have lost £91 on that particular bet.
How to Spread Bet the Singapore Stock Market Index
Trading the Singapore Stock Market Index, such as the Straits Times Index (STI) or related indices like the MSCI Singapore Index, requires understanding its unique characteristics and employing disciplined trading strategies. Here are some tips and guidelines to help you navigate this market:
Understand the Market Dynamics
- Key Drivers: The STI is heavily influenced by the performance of its top 30 companies, which represent various sectors like banking, real estate, and industrials.
- Global Influence: As Singapore is a major trading hub, its stock market is sensitive to global economic trends, particularly in Asia and major trading partners.
- Sector Analysis: Familiarize yourself with the dominant sectors in the index to predict potential movements based on sector-specific news.
Analyze Historical Performance
- Volatility: The STI is known for its directional movements and relatively high volatility compared to some Western indices, making it suitable for spread betting.
- Technical Analysis: Use tools like moving averages, RSI (Relative Strength Index), and Bollinger Bands to identify trends and entry/exit points.
- Past Patterns: Study historical responses to events like earnings reports, interest rate changes, or geopolitical developments.
Choose the Right Trading Strategy
- Short-Term Trades: Take advantage of intraday volatility with tight stop-losses and profit targets.
- Swing Trades: Look for medium-term opportunities by analyzing chart patterns and market sentiment.
- Directional Trading: Spread betting allows you to profit from both upward and downward moves, so focus on predicting the direction, not just growth.
Manage Your Risk
- Leverage Cautiously: High leverage amplifies both gains and losses. Use it judiciously based on your experience level.
- Stop-Loss Orders: Set clear stop-loss levels to minimize losses during unexpected market swings.
- Position Sizing: Adjust your stake size based on the index’s numerical value (e.g., lower stakes for high-value indices like the STI).
Monitor Global Economic Trends
- Currency Impact: Singapore’s export-driven economy means currency fluctuations (e.g., SGD vs. USD) can impact the index.
- Regional Developments: Events in neighboring markets like China, Malaysia, and Indonesia often influence the STI.
- Interest Rates and Policy: Keep an eye on monetary policy changes, both locally and globally.
Stay Informed
- Economic Calendar: Track key announcements, such as GDP figures, inflation rates, and employment data.
- Corporate News: Watch for earnings reports and corporate developments from the top 30 companies in the STI.
- Market Sentiment: Use sentiment indicators and news analysis to gauge investor confidence.
Use Technical Tools
- Charts and Indicators: Utilize trendlines, Fibonacci retracements, and support/resistance levels.
- Volume Analysis: Observe trading volumes to confirm price movements and identify potential reversals.
Be Aware of Costs
- Spread Costs: Understand the bid-ask spread your broker charges, as this impacts profitability.
- Rollover Fees: If holding positions overnight, check for any associated financing fees.
For more than 20 years now, the Singapore stock market has operated from a single exchange, the Singapore Exchange Limited (SGX). Prior to this time there were two exchanges, the Singapore International Monetary Exchange (SIMEX), and the Stock Exchange of Singapore (SES), but these were merged together. If you ask, most people will say that the Straits Times Index (STI) is the benchmark index for the Singapore stock market, and it currently tracks the performance of 30 companies, reduced from 50 just a couple of years ago.
The STI is capitalization weighted, and based on the top 30 companies listed on the Singapore Exchange. It started life many years ago, and at that time included between 45 and 50 companies, but the Singapore Stock Market Index has been reviewed and changed by various experts over the years. Not all spread betting companies list this index, and some such as IG Index list a “Singapore Blue Chip” whose value is related more to the MSCI Singapore Index. MSCI stands for Morgan Stanley Capital International.
Here’s a comparison of the STI index and the MSCI equivalent: –
As you can see, there is little to choose between them in terms of volatility and direction, so you can use the same tactics on either.
The Singapore market was the first Asian market that integrated securities and derivatives, and most of the revenue comes from the securities market but the derivatives contribute about 30%. The international nature of most financial trade nowadays means that world conditions will affect the Singapore Stock Market. The particular dip shown above, in 2011, reflects the European uncertainty.
Fortunately, with spread betting you are not concerned about the strength of a market, as a downward move is equally useful as an upward one to make a profit. Unlike investing, you do not need the overall numbers to go higher, but can trade in either direction. In this respect, you can see from the above charts that the Singapore Stock Market Index could work out to be a good choice for your trading, as it exhibits large fluctuations and good volatility.
To make a profit from the STI or the MSCI equivalent index, you first need to research the properties of the market. Many of the companies will be unfamiliar to you, but by applying technical analysis to the movement of the price you will be able to form a judgment on the likely strength and direction of the next move. As you can see, historically the index is not recently had much sideways, or “trendless” movement, but gone up and down quite violently. This means that it is suitable for betting on much of the time, at least while the current performance continues.
Therefore by applying technical analysis you will frequently be able to identify opportunities for a bet in one direction or the other. A word of caution, as the price changes have been so fast you need to have strong stop loss provisions and adhere to them so that you do not get caught out and lose too much capital.
