Making Sense of Singapore’s Stock Market’s Recent Violent Decline

Yesterday, Singapore’s market barometer, the Straits Times Index (SGX: ^STI), fell by 2.9% to 3,061 points to register its largest daily loss in 2015 thus far. For perspective, the second-largest daily decline in the year was a relatively mild 1.67%.

A fall with the magnitude we saw yesterday may thus spook many investors and cause some to react in a way that harms their portfolio. For this reason, it’s good to look back at history for some context on just how often the index has suffered large daily declines.

Database provider S&P Capital IQ has full-year records of the Straits Times Index going back to the start of 1993. From then to yesterday, there have been a total of 5,812 trading days. Just how frequent have daily losses of 2%-or-more and 3%-or-more been? Here’s what I found:

Percentage daily decline Number of days
2% or more 238
3% or more 90

Source: S&P Capital

So, historically speaking, a decline of more than 2% isn’t all that rare (it has happened 238 times over the last 22 years since the start of 1993). A daily fall of 3% or more happens way less frequently, but it’s still far from being an extreme rarity.

In other words, yesterday’s 2.9% decline, while painful, is not a sign that we should be retreating into our shells because something’s broken.

As it stands, the Straits Times Index is today nearly double where it was back at the start of 1993; this has occurred despite all the sharp daily declines that we’ve seen occur over that timeframe. Short-term volatility is the name of the game when it comes to the stock market and it’s something investors have to get used to in their quest to earn satisfying long-term returns.

There're plenty of other interesting things about stock market history to discuss. If you'd like to do so in person, you can come meet David Kuo and the rest of the Fool Singapore team on August 15! 

Please join us at Invest FAIR Singapore on 15 August. (Suntec Centre, Booth B-16). Come chat with us at our booth, and see our MAS-licensed Director, David Kuo, give his official SGX investor presentation.

You won't want to miss this! Add Invest FAIR Singapore to your calendar today.

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.