Is Singapore’s Stock Market Really Lifeless?

In 2007, the daily average turnover of Singapore’s stock market stood at S$2.39 billion. The turnover has since slid by some 56% to S$1.06 billion for the first 10 months of 2014.

These figures, which are gleaned from financial journalist Goh Eng Yeow’s Monday article in The Straits Times titled “Remisers feel the chill as investors shun local market,” are a stark reminder of how the fortunes of Singapore’s stock market have turned since its heydays just prior to 2007.

Singapore’s market benchmark, the Straits Times Index (SGX: ^STI), seems to have reflected this malaise as well as it’s still some 14% lower at its current level of 3,345 points since hitting a record high of close to 3,900 points back in October 2007.

Yesterday morning, I wrote an article and looked at why it can be a great thing for investors if Singapore’s share market is truly being neglected and became lifeless as a result. It’s a topic which seems to have captured readers’ attention given that my piece had sparked a healthy amount of discussion on both The Motley Fool Singapore’s Facebook page and the article’s comments section itself.

But as I went through the day, I couldn’t help but wonder if Singapore’s share market had really been a “zombie market,” as a reader called it, ever since the Great Financial Crisis (GFC) of 2007-09 had passed.

So, I turned to stock market data provider S&P Capital IQ for some answers and screened for the number of shares in Singapore which have generated compounded annual returns of at least 15% since the start of 2011.

The starting date is significant for two reasons. Firstly, the Straits Times Index had basically gone nowhere since it began 2011 at 3,261 points. Secondly, I wanted to put some distance between the Straits Times Index’s GFC-trough (which was reached on March 2009) so that the return-figures for the shares I’m screening for are not clouded by a sharp rebound from extremely depressed valuations.

As for the 15% figure, I chose that because an investor who’s able to achieve 15% compounded annual returns would be able to double his money every five years – those are the sort of returns many investors are after.

Turns out, of the 750 shares listed in Singapore which S&P Capital IQ has data of currently, some 58 shares had generated at least 15% in compounded annualised returns since the start of 2011. If Singapore’s market had really been a “zombie market”, I doubt you’d see some 7.7% of the local market being well on their way to achieving at least a double by the end of 2015 based on their current growth trajectory in share prices.

A deeper dive into that group of 58 also reveals something really interesting: Thai Beverage Public Company Limited (SGX: Y92) is the only one in there which is part of the current crop of 30 shares which make up the Straits Times Index.

This tells me something important about the local market that I think investors should note: The experience of the Straits Times Index can at times be a very poor indicator of what investors might really encounter in the broader Singapore share market.

Indeed, since the Straits Times Index had crested to its all-time peak of 3,906 points on 10 October 2007, some 40 shares (out of the current crop of 750 which S&P Capital IQ has records of) have achieved at least a double in price. And of those, only four shares – Thai Beverage, Jardine Cycle & Carriage Limited (SGX: C07), Jardine Strategic Holdings Limited (SGX: J37), and Jardine Matheson Holdings Limited (SGX: J36) – are part of the current incarnation of the Straits Times Index.

A Fool’s take

A decline in trading volumes is bad news for remisers, as Goh pointed out in his article. A meandering and lifeless Straits Times Index can give investors bad vibes about the local market.

But, things aren’t all gloomy for investors. A deeper look beneath the surface shows that Singapore’s stock market can still be a fruitful place for stock pickers and is also not as zombie-fied as some might believe – the 58 shares, which are on track to double at the end of 2015 since the start of 2011, provides strong support for my view.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.