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

Last May, I had an idea to collect important facts and figures about Singapore’s stock market history and present them in a single article.

But, what good is history you might ask? After all, billionaire investor Warren Buffett once said that “if past history was all there was to the game, the richest people would be librarians.”

Thing is, while knowledge of history does have its limits in the game of investing, it can still serve an incredibly important purpose. “So much of doing well in the stock market comes down to knowing what to expect,” my colleague Morgan Housel once wrote. And, it is precisely historical information about the stock market that can help investors know what to expect when they decide to plow their hard-earned savings into stocks.

The aforementioned idea in my head eventually became an article I published on 29 May 2015 that’s titled 6 Things You Have To Know About Singapore’s Stock Market. In it, I wrote that it “will be a work in progress, something which I’d update whenever I come across new information.”

I have added six more facts to my list since to bring the total fact-count to 12. You can see all the updates in here (the seventh), here (the eighth), here (the ninth), here (the 10th), here (the 11th), and here (the 12th). Let’s look at the 13th factoid I had recently found:

13. Bad Mondays in the stock market have been common throughout history and it does not necessarily mean that stocks will have a poor year ahead

The first trading day of 2016 was a Monday (4 January 2016) and it proved to be a terrible start to the year for the stock markets in many countries.

For instance, Singapore’s Straits Times Index (SGX: ^STI) had slipped by 1.62% while the stock market benchmarks in Hong Kong and Japan had declined by 2.68% and 3.06%, respectively. Chinese stocks did way worse – the Shanghai Composite Index had sunk by 6.86% before trading was stopped in China for the day.

While it may be natural to worry now given the shellacking the markets had received on that bleak Monday, it’s worth looking back in time to see what history has to say when the markets have had poor starts to the week.

To do so, I pulled up more than 23 years’ worth of pricing data stretching back to May 1992 for the Straits Times Index from S&P Capital IQ. With my data-set, I sought to answer two questions:

  1. How often had the Straits Times Index fallen by 1.5% or more on a Monday? The limit of 1.5% was picked because it is similar in magnitude to the 1.6% decline that the index had experienced on 4 January 2016.
  2. How has the index performed a year later after each “1.5%-Monday” that it had experienced?

Here’s what I found:

  1. I have 1,216 Mondays in total in my data-set. Of those, I have 126 Mondays that have seen the Straits Times Index fall by over 1.5%.
  2. In the collection of 126 “1.5%-Mondays” that we have, the Straits Times Index had (a) ended up higher on 76 occasions, (b) gained 10% or more on 58 occasions, and (c) clocked a return of 20% or higher on 46 occasions.

Here’s a tabular representation of the second point in my list of findings for more clarity:

Source: S&P Capital IQ; author’s calculations (click table for larger image)

I have two big takeaways from all that we’ve seen so far, though we have to keep an important caveat in mind that there’s no iron law dictating that the future must look the same as history.

Firstly, having a bad Monday is a fairly common thing historically. Secondly, and more importantly, seeing stocks fall painfully on a Monday need not necessarily mean that we’d have a bad year ahead.

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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.