STI ETF

[peterchan75]

In theory, Is it a possibility that sti keeps dropping but this etf remain stable as NOBODY wants to sell, what will the etf manager do to make its price follow sti?

The value of STI ETF is based on its underlying which are the value 30 stocks in the STI index.

 

[athletic91]

The value of STI ETF is based on its underlying which are the value 30 stocks in the STI index.

Yes I understand. However if one day in theory zero trading volume. The price will remain stagnant even as sti floats.

Eg STI drops till 2000, however nobody willing to sell below 2.20. So in theory sti is 2000 but the etf is $2.20. How Will the fund managers react to track

 

[shallow]

Yes I understand. However if one day in theory zero trading volume. The price will remain stagnant even as sti floats.

Eg STI drops till 2000, however nobody willing to sell below 2.20. So in theory sti is 2000 but the etf is $2.20. How Will the fund managers react to track

They wont and have to do anything. This is traded in the secondary market aka open market. Their job is to create/destroy unit if people want to buy/redeem the units of etf from the manager directly, at NAV.This is achieved by buying/selling the underlying stocks.

If your scenario happens, and it is at a discount at NAV, then people can just buy an infinite amount on the secondary market and redeem with the manager at infinite profit. These mechanisms ensure the price etf will be as closely match the index as possible.

Of course their job is also ensure STI is tracked with as little deviation as possible.

 

[flikmy]

Yes I understand. However if one day in theory zero trading volume. The price will remain stagnant even as sti floats.

Eg STI drops till 2000, however nobody willing to sell below 2.20. So in theory sti is 2000 but the etf is $2.20. How Will the fund managers react to track

That doesn't happen as there are market makers (Philips, HSBC, etc...) that provide a price that moves according to STI. Also, for these market makers, they are able to convert the ETF into their constituents if they need to since they're dealing in much larger sizes.

 

[Ahboy069]

Any risks for holding sti etf long term ?
Will sti etf go bankrupt?

Technically this is the safest to buy with plus they give out dividends
At most just wait out 3 years like the ntuc 3 years plan ...
Since it won’t collapse like company ...
Just that earn also won’t be much la
Just don be greedy
Right ,?

 

[yiron]

Any risks for holding sti etf long term ?
Will sti etf go bankrupt?

LOL STI ETF cannot go bankrupt in the traditional sense of the word.


What can in theory happen is that all 30 constituents of the index go bankrupt and their shares become utterly worthless, then your ETF will be $0 as well.

As bad as things look, that is unlikely to happen. We may see a few of the constituents go into distress, but all 30 is like financial armageddon for Singapore. Most of us here with a day job would probably be unemployed before that happens.

 

[shallow]

Technically this is the safest to buy with plus they give out dividends
At most just wait out 3 years like the ntuc 3 years plan ...
Since it won’t collapse like company ...
Just that earn also won’t be much la
Just don be greedy
Right ,?

You seem confuse with what is an index and ETF and the fund manager of ETF.


Firstly STI index is a basket of companies stocks that is market cap weighted(someone confirm?). You cannot buy it in the open secondary market(sgx).

STI ETF is an ETF that tracks STI. These are the ES3 and G3B that you can buy via the open market.

The fund manager of the 2 ETF the people that make sure the ETF tracks the STI as closely as possible.

With that said, your question can be interpreted in 2 ways.
1. Can the companies in STI go bankrupt?
2. Can the fund manager go bankrupt?


To answer question 1, yes the companies in the Index can go bankrupt, but will all 30 companies all go bankrupt together? Highly unlikely.

To answer question 2, yes the fund manager can be insolvent and go bankrupt, but that does not mean you will lose your money vested in the ETF. The assets are stored in a custodian that is not related to the fund manager. In the even the fund manager goes bankrupt, the custodian will just liquidate the assets and the proceeds will go to the investors after deducting some minimal fees.

 

[havetheveryfun]

You seem confuse with what is an index and ETF and the fund manager of ETF.


Firstly STI index is a basket of companies stocks that is market cap weighted(someone confirm?). You cannot buy it in the open secondary market(sgx).

STI ETF is an ETF that tracks STI. These are the ES3 and G3B that you can buy via the open market.

The fund manager of the 2 ETF the people that make sure the ETF tracks the STI as closely as possible.

With that said, your question can be interpreted in 2 ways.
1. Can the companies in STI go bankrupt?
2. Can the fund manager go bankrupt?


To answer question 1, yes the companies in the Index can go bankrupt, but will all 30 companies all go bankrupt together? Highly unlikely.

To answer question 2, yes the fund manager can be insolvent and go bankrupt, but that does not mean you will lose your money vested in the ETF. The assets are stored in a custodian that is not related to the fund manager. In the even the fund manager goes bankrupt, the custodian will just liquidate the assets and the proceeds will go to the investors after deducting some minimal fees.

regarding pt 1, components in index can go bankrupt or insolvent but they can get kicked out and be replaced. Noble Group for example.

 

[JJJ010101]

Yes I understand. However if one day in theory zero trading volume. The price will remain stagnant even as sti floats.

Eg STI drops till 2000, however nobody willing to sell below 2.20. So in theory sti is 2000 but the etf is $2.20. How Will the fund managers react to track

You can't think of it like stocks, ETF is different. Other than supply/demand of the ETF itself, the underlying 30 stocks will also move the price.

In your example, if STI drop to 2000, it means the underlying 30 STI constituents have collectively dropped in value, so the fund manager will do physical replication (buy/sell the underlying) to follow the drop in prices and STI ETF NAV price will follow suit.

I can't explain very well, but basically it doesn't move like normal shares as you imagined.

 

[ftpofmpo]

isn't it a gain if the gov can swoop in and nationalize the whole company for cheap when it faces a liquidity crunch and need a bail out, especially if it holds < majority shares

 

[JJJ010101]

isn't it a gain if the gov can swoop in and nationalize the whole company for cheap when it faces a liquidity crunch and need a bail out, especially if it holds < majority shares

I think this will weaken the competition of a free market.. and soon no other companies will want to come Singapore to compete anymore.. Innovation will slow down.. etc.

an economy needs private sectors to have incentive to grow

 

[Ahboy069]

So as long as not too greedy but this hold long long will earn mah
If but company may bankrupt hold long long also no use

 

[wutawa]

So as long as not too greedy but this hold long long will earn mah
If but company may bankrupt hold long long also no use

True, if any of the 30 companies not doing well, the company will be replaced by a better company and sti will still live.

 

[XGZ1503]

Why is it green today?

 

[sherica]

Why is it green today?

expected one. next week same pattern again

 

[SkyNinja]

Why is it green today?

After lunch check again.
......

 

[tweeety]

green green awhile.......

it is to slow down the drop. oops.

 

[PrincessX25]

Hi.. I m new in ETF. Can I chk if buying of STI ETF is the same process of buying stock?

Sent from Samsung SM-N950F using GAGT

 

[_dXter]

Hi.. I m new in ETF. Can I chk if buying of STI ETF is the same process of buying stock?

Sent from Samsung SM-N950F using GAGT

Yes, it is.

 

[wutawa]

Hi.. I m new in ETF. Can I chk if buying of STI ETF is the same process of buying stock?

Sent from Samsung SM-N950F using GAGT

Except that the lot size is 10.