Singapore’s Stock Market on Track for Least Volatile Year in 21 Years

Lately, there have been posts on Internet forums dedicated to Singapore’s stock market lamenting about the lack of participation in the market by investors.

There’re some truths in their complaints as financial journalist Goh Eng Yeow reported in November that the “[a]verage daily stock market turnover for the first 10 months this year fell 29.8 per cent to $1.06 billion from the same period last year.” The turnover seen in 2014 is also a 56% decline from the heydays of 2007 when it hit S$2.39 billion.

Calmness abounds

But amid general apathy about Singapore’s stock market comes something comforting for investors with weak stomachs: A decline in market volatility. In fact, Singapore’s market barometer, the Straits Times Index (SGX: ^STI), is on track to clock its least volatile year ever over the past 21 years since 1993.

Volatility of Straits Times Index

Source: S&P Capital IQ

The chart above plots the number of days in each calendar year when the Straits Times Index has gained or lost more than 1%. The market benchmark has clocked 18 “1%” days so far this year (as of 11 December 2014), which as you can see, is well below the average of 77 from 1993 to 2013. That 18 figure is also lower than the previous record-low of 22 seen in 2005.

Investors who bought into the Straits Times Index through exchange-traded funds like the SPDR STI ETF (SGX: ES3) and the Nikko AM Singapore STI ETF (SGX: G3B) would likely have been able to sleep more soundly at night this year given the lack of volatility.

Bringing all that calmness forward

But, what can all these tell us about the market’s returns going forward? Turns out, it can tell us nothing.

1998 was especially volatile with 151 “1%” days; in 1999, the Straits Times Index went on to spike by 78%. In 2005, the index was really calm (as mentioned earlier), and yet, the index had increased by 48% from the start of 2006 to the end of 2007. The experience of the volatile 2000, a year which saw 115 “1%” days, would be another good example – the Straits Times Index went on to lose 16% in value in 2001.

A Fool’s take

So, 2014 has been a really quiet year for investors so far en route to it clocking a 5% gain year-to-date and that might have helped more investors get a better night’s rest. But besides that utility, how calm or violent the market has been can tell us nothing about what it would do in the future. It’d pay for you to keep this in mind the next time you’re worried about how eerily calm or chaotic the market is.

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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.