7 Things You Have To Know About Singapore’s Stock Market

Near the end of May, I had penned an article titled 6 Things You Have To Know About Singapore’s Stock Market.

In it, I had shared important historical data about Singapore’s stock market and explained that such data can be very valuable to have as they can help investors understand stock market history which in turn, can give context to whatever may happen to the market in the future.

I also wrote in the article that it’s a piece that “will be a work in progress, something which I’d update whenever I come across new information.” As I had recently gotten hold of a piece of new and useful data, I thought it’d be a good time to update the article with the seventh factoid about Singapore’s stock market that you have to know.

(The first six things you have to know are already given in the link above, so I’d jump directly to the seventh here.)

7. The stock market’s valuation can swing to wild extremes.

Over the 37-year period from 1973 to 2010, the Straits Times Index (SGX: ^STI), Singapore’s most widely followed market barometer, has had an average price-to-earnings ratio of 16.9. This is useful to know as it can give us context when interpreting the index’s current and future valuation figures.

But it’s important to note that an average is just that – an average.

It masks all the chaos that can happen from time to time, even though it’s the extreme points of chaos that we should be taking note of lest we invest with the sorely mistaken notion that the financial markets move in a smooth, plodding manner.

For a taste of how wild the Straits Times Index’s valuation can get, try the following. In 1973, the Straits Times Index was in a bubbly situation, so much so that it was valued at 35 times its earnings. This is in stark contrast to the start of 2009, when the stock market was in a very sombre mood. How do I know? Well, that’s because the Straits Times Index had a price-to-earnings (PE) ratio of just 6.

So, don’t expect the valuation for Singapore’s market barometer to stay within a tight band of that average 16.9 figure all the time.

That’s all I have when it comes to updating my earlier article. Is there anything about the history of Singapore’s stock market that you’d like to know? Or, is there anything you’d like to discuss? Feel free to let me know through the comments section below!

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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 company mentioned.