Singapore 25 Trading: What Is the MSCI Singapore Index?

When getting started with index trading, many traders often focus on the most traded indices, such as the DAX 40 (Germany 40) and the FTSE (UK 100) in Europe, the S&P 500 and the Nasdaq-100 (US Tech 100) in the United States and the Nikkei 225 (Japan 225) in Japan. Nevertheless, there are other indices that can offer interesting opportunities, such as the Singapore 25 (SGP), which is a leading stock market index for Singapore.

Let‘s now examine the Singapore 25 index in detail, including its constituents, the factors that influence its value and the process of trading the Singapore 25 index using Contracts For Difference (CFDs).

TL;DR

• The Singapore 25 is a stock market index.
• On Plus500, it replicates the value of the MSCI Singapore index futures on, whose index was launched in 1986.
• The MSCI Singapore Index serves as a key indicator for Singapore‘s stock market performance.
• The index has 21 components as of May 2024.
• Financials and communication services dominate the Singapore 25, making up over 70% of the index in May 2024.
• The value of the Singapore 25 index can be influenced by various factors, such as corporate earnings, the regulation from the Monetary Authority of Singapore (MAS), the monetary policy in Singapore, the global economic growth stage and prospects, unexpected events, and trading psychology.
• Contracts For Difference (CFDs) on index is a popular method for actively trading the index for retail traders through various popular trading strategies like day trading, swing trading and position trading.

What Is the MSCI Singapore Index?

The Singapore 25 index monitors the financial performance of firms listed in the Singaporean stock market that fall under the big and mid-cap categories. As of May 2024, the index comprises 21 leading corporations, which collectively account for around 85% of the total value (adjusted for free float and market capitalisation) of publicly listed companies in Singapore. Put simply, the index measures the performance of important and liquid companies that are listed on the Singapore Exchange.

The Composition of the Singapore 25 Index

Just like with any stock market index, a handful of companies in the Singapore 25 hold more weight than others. These are known as the index‘s largest constituents. Since their stock prices significantly impact the overall index value, keeping an eye on them might help you get a better understanding of the underlying dynamics of the index.

Top 10 Components of the MSCI Singapore 25

As of May 2024, the 10 largest constituents of the MSCI Singapore 25 index, which represent around 82% of the index, are the following:

1. DBS Group Holdings (D05.SGX) - Weight on the index: 22.56%
2. OCBC Bank (O39.SGX) - Weight on the index: 15.46%
3. United Overseas Bank (U11.SGX) - Weight on the index: 12.25%
4. SEA A ADR - Weight on the index: 10.59%
5. Singapore Telecom (Z74.SGX) - Weight on the index: 6.44%
6. Capitaland Integrated - Weight on the index: 3.28%
7. Singapore Airlines (C6L.SGX) - Weight on the index: 3.17%
8. Keppel (BN4.SGX) - Weight on the index: 3.08%
9. Capitaland Ascendas Reit - Weight on the index: 3.07%
10. Grab Holdings A (GRAB) - Weight on the index: 2.97%

Sector Weights of the MSCI Singapore 25 (as of May 2024)

The Singapore 25 Index CFDs on Plus500

The Singapore 25 is a tradable financial product available on the Plus500 trading platform. It represents a Future CFD, or Contract For Difference, derived from the MSCI Singapore index futures, which are offered by the Singapore market (SGX), a prominent futures market in Asia. Traders may use it to trade an established Singaporean stock index that monitors the large and medium-sized companies in the Singapore market.

What Are Index CFDs?

Index CFDs, or Contracts for Difference based on indexes, allow you to speculate on the price movements of a stock market index, like the Singapore 25, without directly owning the underlying asset.

An index CFD is a contract between index traders and their CFD provider like Plus500 to exchange the difference in value between the opening value of the CFD index and its closing value.

If you believe the Singapore 25 index will go up, you can buy a CFD contract. If your prediction is correct, and the index rises, you can profit from the difference. Conversely, if the index falls, you can incur a loss. Similarly, you can short-sell a CFD contract if you believe the index will go down, you can potentially profit then from a falling index, but if the Singapore 25 rises, you can face losses.

Potential Advantages of Using Index CFDs on Singapore 25

Let‘s talk about potential benefits of CFD trading on the MSCI Singapore Index:

• Reflecting the Singapore Economy: The Singapore 25 index seems to be a reliable stock market indicator that offers an overview of the collective performance of publicly listed firms in Singapore, effectively reflecting the state of the Singapore economy.
• High Liquidity: CFDs are liquid products that allow traders to buy and sell their positions relatively quickly at their expected price.
• Various Trading Strategies: Index CFD trading offers flexibility. A variety of trading styles and strategies can be used, allowing different types of traders to find approaches that suit their risk tolerance and trading goals.
• Possibility to Speculate on all Market Conditions: Trading CFDs also gives traders the ability to speculate on bullish or bearish market conditions.
• Diversification: The Singapore 25 provides a diversified way to invest in the Singaporean stock market through a single product. This product, essentially a basket of shares from leading companies, offers exposure to a variety of sectors.

The Potential Limitations of Singapore 25 Index CFDs

While CFDs on the Singapore 25 offer potential rewards, it‘s important to be aware of the inherent risks involved in CFD trading, such as:

• Leverage: Because it can amplify both profits and losses, leverage is among the biggest risks of trading CFDs.
• Time difference: Trading an index like the Singapore 25 can be a challenge if you‘re not in the same time zone. Because it might be harder to follow the news and the markets, negative surprises can happen when you‘re not monitoring.
• Limited Analysts’ Coverage: Unlike extensively covered indexes like the Euro Stoxx 50 and the Nasdaq 100, finding reliable data about the Singapore 25 index and/or its components can be more challenging.
• Complexity: Trading CFDs on the Singapore 25 can have its advantages, but CFDs can also be complex financial instruments for beginner traders. Trading terms like slippage (the difference between your intended entry/exit price and the actual executed price) and margin requirements (the minimum amount you need to put down to control a larger position) are essential to understand before trading CFDs.

What Are the Trading Hours of the MSCI Singapore Index?

The MSCI Singapore Index Futures on the SGX offer a distinct advantage: extended trading hours. These hours are divided into a regular trading session and a next-day trading session to allow traders from both the European and American time zones to be able to trade the futures on this Singaporean index.

Singapore Index Trading Session:

• Pre-Opening (8:15 am - 8:28 am): This period allows you to place orders before the market officially opens. These orders are not guaranteed to be executed until the opening bell.
• Non-Cancel (8:28 am - 8:30 am): Orders placed during this brief window become executable and cannot be withdrawn.
• Opening (8:30 am - 5:20 pm): This is the core trading period where orders are matched and executed throughout the day.
• Pre-Closing (5:20 pm - 5:24 pm): Similar to pre-opening, orders placed here are not guaranteed execution until the closing bell.
• Non-Cancel (5:24 pm - 5:25 pm): Another brief window where orders become unchangeable and are executed if possible.

Singapore Index Trading Session + 1 (Next Day Trading Session):

• Pre-Opening (5:40 pm - 5:48 pm): You can submit orders before the extended session begins.
• Non-Cancel (5:48 pm - 5:50 pm): Orders placed here become binding and cannot be cancelled.
• Opening (5:50 pm - 5:15 am): This extended session allows trading outside of the regular market hours, offering greater flexibility but potentially lower liquidity.

Note: Trading hours for CFDs on Singapore 25 can vary depending on the CFD provider you choose. Make sure that you check them out before you decide to trade CFDs on Singapore 25.

How to Trade the Singapore 25 Index

Here are the various financial products you can use to get exposure to the Singapore 25 Index*:

• CFDs (Contracts for Difference) on the Singapore 25 index
• ETFs (Exchange-Traded Funds) on the index or that include the index
• Singapore 25 futures contracts
• Singapore 25 options contracts

Instead of trading the entire Singapore 25 index, you have some alternative choices if you prefer stock picking. You can invest directly in any of the companies included on the index by buying their shares on the Singapore Exchange (SGX) or other exchanges. You can also use CFDs on shares that allow you to speculate on the price movements of individual stocks or of CFDs on ETFs that include some of the Singapore 25 companies.

*Availability based on regulation.

Examples of Trading Strategies on the Singapore 25 Index

When deciding how to trade an index, trading strategies can be divided by trading styles, which mostly depends on your availability, time horizon, risk tolerance and trading capital. The most common ones are day trading (from a few minutes to a few hours), swing trading (from a few days to a few weeks) and position trading (a few months)

There are various types of trading you can integrate into your trading depending on the trading style you choose. Here are 4 popular strategies:

1. News Trading: This type of trading relies on the impact of major market news on the market, such as the Consumer Price Index (CPI), the Consumer Confidence Index (CCI), the Gross Domestic Product (GDP), and the Purchasing Managers‘ Index (PMI). News releases often trigger market volatility, creating price swings. News traders aim to exploit these short-term price movements by trading economic data.
   
   They can either enter a CFD position on the Singapore 25 before the news release or afterwards, depending on whether or not they have a directional bias. If they believe the news will push the index up, they might buy a CFD contract on the Singapore 25 index before the statistic is published. Conversely, they might sell a CFD if they anticipate a decline.
   
   News trading presents a unique challenge due to the market‘s unpredictable reactions to economic news. While it can be tempting to capitalise on short-term volatility, success requires several key skills such as a solid understanding of economic data, a quick decision-making decision process, a disciplined trading approach, as well as sound risk management and the ability to handle potential losses.


2. Range Trading: Usually, traders can capitalise from either a trendy market, up or down, or a flat market that mostly moves horizontally between a support and a resistance level.
   
   Range trading falls into the second category. This type of strategy focuses on capitalising on the Singapore 25 movement that stays within a predictable price range for a certain period. Traders can decide to buy the index when it is close to a support level, and sell it when it approaches a resistance level.
   
   In addition to support and resistance, there are a few other technical indicators and chart patterns, such as rectangles, symmetrical triangles and Fibonacci extensions and retracements, that can be used to identify potential entry and exit points within the range.
3. Breakout Trading: While range trading is all about trading the index between two key price levels, breakout trading is a strategy that tries to capitalise on the moments when the index breaks free from established patterns or range.
   
   If the Singapore 25 index decisively breaks above a resistance, breakout traders might buy a CFD contract expecting the price to keep climbing. If it breaks below a support, they might sell expecting the price to keep dropping and they can short-sell the index.
   
   Once again, knowing how to identify support and resistance levels is key to this type of trading, but you‘ll also need to know when to spot potential breakouts. Technical indicators focusing on trading volume and volatility can help traders, as well as confirmation and reversal chart patterns.


4. Trend Trading: This form of trading seeks to generate potential profits by gaining exposure to the price fluctuations of the Singapore 25 index in a certain direction, either upward (uptrend) or downward (downtrend).
   
   So, trend traders look to profit from price movements in a particular direction. During an uptrend, they aim to buy the Singapore 25 index at a lower price and then sell it later for a higher price when the index climbs. The opposite happens in a downtrend. Traders might look to short-sell the index expecting the price to fall further.
   
   Moving averages are often a popular tool to identify the main trend with MACD (Moving Average Convergence Divergence) and ADX (Average Directional Index). The MACD combines elements of moving averages and momentum to identify potential trend reversals, while the ADX helps measure the strength of a trend.

Now that you're familiar with the Singapore 25, you might want to consider trading CFDs on the Singapore 25 contract through Plus500.