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

In May this year, I had the idea to collect important pieces of historical data about Singapore’s stock market and present them in a single article.

The reason for doing so is that history can give investors crucial context when it comes to interpreting and understanding what may happen to stocks here in the future. For example, “People would be less scared of volatility if they knew how common it was,” my colleague Morgan Housel once said.

That idea in my head eventually crystallised into an article titled 6 Things You Have To Know About Singapore’s Stock Market which was published on 29 May 2015.

In the article, I mentioned that it’s actually “a work in progress, something which I’d update whenever I come across new information.” I’ve made three updates to it since (see here, here, and here) to bring the total count of important facts to nine. Here’s the 10th.

10. Singapore’s stock market performance when the economy has shrank

Singapore’s economic growth from 1993 to 2013 had been really impressive, with gross domestic product (GDP) expanding from S$98 billion to S$378 billion according to numbers from the Department of Statistics Singapore. But along the way, there were some stumbles, with the nation’s annual GDP having shrank in 1998 and 2001.

Here’s how the Straits Times Index (SGX: ^STI) had done in both 1998 and 2001 as well as in the subsequent year for both periods:

Year Straits Times Index’s annual return
1998 -9%
1999 78%
2001 -16%
2002 -17%

Source: S&P Capital IQ

What we can see is that a shrinking economy hasn’t been too kind to stocks (1998 and 2001 were both bad years for the Straits Times Index). But before you try to treat economic data as actionable investing cues, do note that we’ve only had two – a miserly two – data points to work with in the 20-year period from 1993 to 2012. Two points hardly make a trend.

Another thing worth noting is that a shrinking economy can’t tell us much about what stocks will do over the next year. The table above shows how 1999 was a great year for the Straits Times Index while 2002 was poor.

Peter Lynch, the legendary ex-fund manager of the Fidelity Magellan Fund, once said that “if you spend 13 minutes a year on economics, you’ve wasted 10 minutes.” I agree.

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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.