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The Week In Numbers: How To Boost A Share Price

The introduction of a Minimum Trading Price for Singapore shares, otherwise known as MTP, is causing a stir in Singapore.

A minimum trading price is not exactly revolutionary. On NASDAQ, the minimum bid price is US$1. On the New York Stock Exchange, it is US$1, too. Ours will be S$0.20 by 2019.

The easiest way – but by no means the only way – to boost a low share price up to the MTP is through consolidation. By reducing the number of outstanding shares, the price should, in theory, rise in proportion to the amount of consolidation. But there are consequences, unintended or otherwise, for doing so.

A company could also consider moving to the Catalist market. That could be a quick way to sidestep the MTP rule.

Alternatively, a company could look to improve profits. But that requires effort. It also takes time. If all else remains the same, then the share price could rise slowly to reflect the higher earnings.

Another way could be to improve the quality of the earnings, transparency and the governance of the business. But that requires commitment. Investors might be prepared to pay more for the shares if, they have greater trust in the company and its management.

Who blinked first?       

Australia’s central bank has blinked first. Actually, it’s the second time that it has blinked this year. The Reserve Bank of Australia announced this week that interest rates would be cut to a low of 2%. Some now believe that another cut may not be too far away too.

Australia has been caught at the wrong end of falling commodity prices. China’s slowing economic growth has not helped, either. The resources-dependent economy only grew 2.5% between October and December last year. That is a far cry from the 4.3% it enjoyed three years ago.

Shrinking slowly

Despite Australia’s anaemic growth, it still looks in better shape than Indonesia. South East Asia’s largest economy said its economy shrank 0.18% in the first three months of 2015.

The contraction was an improvement on the previous quarter when the economy shrank 2.06%. The disappointing number was blamed on poor showing by the mining, construction and education sectors. But there was a glimmer of hope from consumer spending, which might bode well for Lippo Malls Indonesia Retail Trust (SGX: D5IU).

Buy, Buy, Buy

America imported more goods than it exported in March – around US$51.4b more. You would have thought that a US trade deficit would be good news not only for the rest of the world but for America too. But it’s not.

The biggest trade deficit for six years means that America could report feeble economic growth figures for the first three months of the year. That is because net exports are one of the main drivers of an economy.

That said, a higher dollar could benefit Singapore companies with US dollar exposure. These might include Hongkong Land (SGX: H78), Jardine Matheson (SGX: J36) and Dairy Farm (SGX: D01).

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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 Director David Kuo doesn’t own shares in any companies mentioned.