For old hands on the Singapore stock market, the five years from 2013 to 2018 have been ones to forget.
The exchange that had hoped to dominate share trading in the booming south-east Asian market looked set for a much more parochial role, akin to one of the smaller European bourses.
Companies de-listed while a fewer new ones floated their stock on the market. This, in turn, led to a drain on liquidity, which, in turn, made the Singapore exchange less attractive.
Factors behind the rally
Liquidity is important not only in terms of providing the funds needed to support growing companies but also as a symbol of a clean market. A deep and liquid market is defined as one in which investors are able to reverse an investment decision at something close to the price they paid.
By contrast, a market in which each player fears the other has inside information or some other “edge” will see very wide “spreads” between buying and selling prices as participants seek to build in some “insurance” against the hidden advantage they suspect other parties of enjoying.
Singapore’s exchange is well-policed, but the decline seemed set to continue.
From 395.43 on 23 April last year, the fell to a recent low of 337.49 on 22 October. It exited 2018 at 341.02, but hit a recent peak of 362.85 on 14 January and is currently trading at 362.23.
A number of factors have helped pep up the market. One is the Singapore government’s New Year budget, which was seen as favourable to a number of sectors including healthcare, property and companies supplying consumer staples. Another has been increased hopes of a truce in the US-China trade dispute, which have generally helped markets across the region.
Economic boom rolls on
But longer-term problems remain. Singapore has more than its fair share of booming companies, but many choose to by-pass the stock market in search of funds. Alternative sources include extensive government support for key industries, family wealth and more liquid markets elsewhere in south-east Asia.
But, economically, the island-state remains on a roll. In its latest Article IV health check, in July last year, the International Monetary Fund (IMF) said: “Singapore’s economy is on a strong cyclical upswing. Economic growth has recovered to a three-year high, led by externally-orientated sectors that benefited from the synchronized global expansion.”
The IMF added: “Economic momentum is becoming more broad-based, helping to reduce the labour market slack. Growth is expected at or above the potential rate in the near term, increasingly supported by domestic demand. Inflation is subdued but expected to rise modestly.”
The MCSI Singapore 25 index includes Singapore Telecom and United Overseas Bank.