Dear readers, Seatrium will join the Straits Times Index (STI) with effect from 19 Jun 2023, replacing Keppel DC Reit.
Keppel DC Reit will in turn join the STI reserve list, together with CapitaLand Ascott Trust, Frasers Centrepoint Trust, Olam Group and Suntec Reit.
The name Seatrium may be not familiar to some readers but this company is none other than the merger of two main offshore and marine companies: Sembcorp Marine and Keppel Offshore & Marine.
Based on FTSE Russell, Keppel DC Reit has only a 0.86% Index weight in the STI as at 31 March 2023, hence I believe the replacement of Keppel DC Reit by Seatrium should not have a significant effect on the performance of the STI going forward.
To me and including many I suppose, the Singapore benchmark index in STI is really shaped by the three big banks here: DBS, OCBC and UOB as both three banking stocks have around 46% in index weight as at 31 Mar 23 or around half of the STI weight; this is really by virtue of the large market capitalisation of the three banking companies.
As such, if there is a constituent change in the STI following a quarterly review, I would think that the STI should likely not be shaped much unless the replacement is arising from a STI constituent with a large index weight. The beneficiary will be on the new STI entrant with the more coverage that the STI entrant will get from the exposure in STI.
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