The component stocks of STI basically indicate the leadership in their sector/ industry. eg. CityDev and HK Land are the leaders in property industry. However, they only represent the listed companies in the Singapore stock market and may or may not be the entire Singapore market. One good example is the biggest property company in Singapore is Far East Organistion who is not listed in the SGX.
When most of the STI component stocks move up, you should see the broad stock market move in the same direction and vice versa. When the market is moving from sector to sector, you will not see much changes in the STI mainly because some sectors move up and others move down. Hence, there are some balancing in the STI.
There are other indices in Singapore market that you should like at and not just STI which is only an index for blue chips listed with SGX. To help in your trading, one should look at other indices such as:
UOB-sesdaq ==> 2nd liner
All finance ==> finance sector
All properties ==> property sector
All Mfg ==> manufacturing sector
etc.
Besides these indices, the Simsci (Singapore Morgan Stanley Composite Index) sometimes gives a better feel of the market comparing with STI.
Unfortunately, there is no one comes out with an All-China stock index,so far.
Conclusion: STI gives you a broad market view and should not affect your decision (that much) in trading SGX stocks unless you are trading blue chips.
The above is just my personal opinion of the STI and hope it helps you in one way or another.
