A file photo of the SGX Centre in Singapore. — Bloomberg
SINGAPORE: Singapore’s main stock index is on track to have its best annual performance since 2017, but any celebrations over the Straits Times Index’s (STI) 15% gain so far this year are likely to be overshadowed by doubts about what lies ahead.
Even with the index hovering near its record high for weeks, investors said the bourse is a shadow of its former self, with delistings outnumbering new listings, the membership less diverse and prominent regional companies such as Grab Holdings Ltd and Sea Ltd going public elsewhere.
For traders who have lived through the boom-and-bust cycle of Singapore stocks, there’s a stark difference between the euphoria back on that record day in 2007 and the reality now.
“In 2007, we saw loads of liquidity. Basically everybody was talking about stocks,” said Terence Wong, chief executive officer at Azure Capital Pte, an investment firm he founded in 2015 after more than a decade on the sell-side.
Now, “the Singapore market is just one of the many options that investors have. It is in a very sad state.”
Maybank Securities Pte’s Thilan Wickramasinghe, who has worked through both stock market peaks, echoed those sentiments.
“There were a lot more listings coming in, a lot more capital,” said Wickramasinghe, who joined the brokerage industry two decades ago. “You could see the changes in Singapore almost on a monthly basis.”
A deeper look at the STI’s gains this year suggests the rally is primarily driven by banks – with the trio of DBS Group Holdings Ltd, Oversea-Chinese Banking Corp Ltd and United Overseas Bank Ltd making up more than half of the benchmark’s weighting.
That compares with less than 30% in early 2008 when the index was revamped to its current 30-member composition.
Another difference is the liquidity. Daily traded volumes in the city-state are far lower than other regional markets such as Australia and Thailand, Morgan Stanley analysts including Nick Lord wrote in a recent note.
Nearly 90% of daily trades in Singapore can be attributed to just 30 of the largest stocks out of more than 600 listed firms on Singapore Exchange Ltd (SGX), and most of these volumes are less than US$10mil a day.
Retail investors make up just 15% of the total turnover in Singapore, compared with 35% in India and 87% in China, according to a UBS Group AG report earlier this year.
“I don’t think we are anywhere near the level of market buzz we saw in 2007,” said Paul Chew, head of research at brokerage Phillip Securities Pte.
At the time, a wave of Chinese companies known as S-chips were listing on the SGX, generating excitement among local investors.
“This time around, there isn’t any strong thematic around the mid-caps,” said Chew. “How long can we sustain the rally with just the banks?”
Singapore officials acknowledged that things could be better.
“Everyone can see there is a need for us to do something to improve the situation that we face today in Singapore,” Second Minister for Finance Chee Hong Tat said in August.
The global financial crisis wasn’t the only catalyst for the collapse and subsequent stagnation in Singapore stocks.
The Chinese “S-chips,” which generated such enthusiasm ahead of the 2007 record, were also part of a series of high-profile scandals in the 2010s that caused Singapore authorities to tighten market regulation.
A penny-stock crash in 2013 further contributed to a loss of retail confidence.
Now Chee is leading a newly formed task force assigned with creating an action plan to revive the market by next summer.
The committee will consider “initiatives to improve the vibrancy” of the stock market, and study ways “to galvanise greater private sector participation” in the effort, the city-state’s financial regulator said in August. — Bloomberg
