Singapore shines, but global diversification still matters

SINGAPORE equities are enjoying a resurgence this year. Market reforms, improving trading activity and growing investor interest have helped put the spotlight back on the local bourse.

This renewed optimism is encouraging. It also serves as a timely reminder of this important investment principle: Diversification is still key since investing across markets and sectors can help reduce dependence on any single economy, policy environment and narrow set of sectors or group of companies.

As attention turns to the domestic market, global diversification can easily become an afterthought. Singapore’s market remains weighted in a handful of sectors, particularly financials, real estate and transportation.

Overseas markets provide access to areas that are less well-represented locally, including large-scale technology, artificial intelligence, semiconductors and global consumer brands.

For some investors, however, accessing overseas markets can feel daunting. They may be unfamiliar with foreign-listed companies, uncertain about opening overseas trading accounts or simply prefer the convenience of investing through Singapore.

The listing of four Xtrackers UCITS exchange-traded funds on the Singapore Exchange (SGX) on Oct 13, 2026, provides an interesting avenue. Tracking the S&P 500, S&P 500 Equal Weight, Nasdaq 100 and MSCI World indices, they offer different approaches to participate in global equity markets while still trading locally on SGX.

Why the US remains central to global portfolios

One caveat I will mention right off the bat about geographical allocation is that the ETFs provide considerable exposure to the US, which accounts for about 50 per cent of global market capitalisation. This is followed by China (9 per cent), Japan (5 per cent) and Hong Kong (4 per cent).

In total, these markets account for close to 68 per cent of the global equity market, and any diversified portfolio is likely to be influenced by developments in these four markets.

Investors seeking overseas exposure will therefore often find themselves maintaining significant allocations to US equities. Global diversification also does not necessarily mean reducing exposure to the US.

That is not necessarily a bad thing. The reality is that the US remains the world’s largest and most influential equity market. Many of the companies driving innovation in areas such as AI, cloud computing, digital infrastructure and advanced semiconductors are listed there.

The question for investors is therefore not whether to invest in the US, but how to balance US exposure with opportunities in other markets.

Four routes to overseas exposure

The Xtrackers S&P 500 UCITS ETF provides exposure to 500 of the largest US-listed companies and is often viewed as a core allocation for investors seeking broad participation in the world’s largest equity market.

The US market, as measured by the S&P 500, has enjoyed strong double-digit annual growth rates of 16 to 24 per cent from 2023 to 2025, after the global pandemic.

Despite the geopolitical tensions, high oil prices and higher-for-longer interest-rate environment in 2026, the S&P 500 has gained 13 per cent so far this year. This was largely supported by strong double-digit earnings growth in the first and second quarters of 2026.

The Xtrackers S&P 500 Equal Weight UCITS ETF, meanwhile, takes a different approach.

Instead of giving larger companies a higher weighting, each constituent receives the same allocation. This results in greater exposure to a broader cross-section of the US market in sectors such as industrials, financials and healthcare, while reducing reliance on the largest technology companies.

The Xtrackers Nasdaq 100 UCITS ETF offers exposure to innovation-led growth – think transformative technologies and long-term structural growth trends. Its holdings include companies in semiconductors, software, cloud computing, AI and digital platforms.

With companies’ substantial investments in this area, new product development and higher consumer adoption are expected to drive demand. Fair warning: Investors should be prepared for higher volatility and changes in sentiment towards such tech stocks.

Lastly, while Xtrackers MSCI World UCITS ETF may still be anchored in the US, it provides the broadest geographic reach among the four products. It invests across 22 other developed countries and about 1,400 large and mid-cap companies.

While the US still represents a significant share of the index, the strategy offers exposure to a wider range of economies, industries and market drivers: Japan (6 per cent), the UK (4 per cent), France and Canada (3 per cent each) and other developed markets (12 per cent) – including Australia, Germany, Switzerland and Singapore.

Local access, global reach

The four ETFs share several practical advantages. They can be traded through local brokerage accounts during Asian trading hours and in Singapore dollars.

Supplementary Retirement Scheme funds may also be used, making it easier for Singapore-based investors to access international markets without trading directly on overseas exchanges.

Another common feature is their Irish domicile. Depending on an investor’s circumstances, this may offer tax and estate-planning advantages relative to certain alternatives listed elsewhere.

Accessibility, however, should not be the investment thesis. Investors should remain focused on the underlying market exposure, valuations, earnings prospects and how each ETF complements their existing portfolio.

That means looking at the portfolio as a whole. The aim is to avoid excessive dependence on any single market. A globally diversified portfolio should seek to capture opportunities across different regions while balancing risk and return objectives.

So, while excitement is high for the Singapore market, the case for diversification will remain. The city-state’s market revival is a positive development for investors and the broader capital market.

But the onus is on every investor to ensure that their portfolio remains sufficiently diversified to capture opportunities wherever they emerge.

Ultimately, global diversification does not mean choosing, say, between Singapore and the US, or avoiding either market altogether.

Rather, it means building overseas exposure thoughtfully, balancing opportunities across regions, sectors and investment styles while maintaining a portfolio that is resilient through different market cycles.

The writer is head of equity research, OCBC