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Casting an eye on the SGX

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Going through SGX’s numbers for May released last night, it seems stock traders sold in May and went away. Hopefully they have not gone far and for long. Hope however, is not often the best strategy. Securities turnover reported for May was $23 billion, down 2% on year and 13% on month. Daily average value of trading was $1.1 billion, down 2% on year and 9% on month. Just for perspective, HK stock market turnover there on Tuesday earlier this week was HKD145 billion or approximately SGD25 billion. In fact there was a day in April when turnover on the Hong Kong Stock Exchange hit almost HKD300billion, more than twice the total value traded on the SGX for the entire month. Turnover on the HKSE has more or less tripled over the past few months, the key contributor to this drive has been the liberalisation of the Chinese capital markets, with the Shanghai-HK connect playing a big part in facilitating the flow of funds between the two exchanges. Over at SGX however, we look like a rudderless ship without a captain at the helm. Indeed, without a successor announce soon, this lackadaisical mood may continue for a while as most search for a direction with regards to the business of equity trading in Singapore. While it is easy to condemn the sombre mood from afar, let’s perhaps look at some suggestions that may be looked at for improvement going forward. First it is important for him or her-the new skipper- to assemble a credible and capable team. Next they need badly to reach out to the stakeholders of the game, most of whom remain disillusioned by the past couple of years of slow pickings. Specifically, remisors, stockbrokers, securities companies, investment banks, corporate finance teams and even corporates themselves have to be engaged and brought to the table to determine a plan, a plan with any fighting chance of helping revitalise the local stock markets and possibly bringing back its vibrancy. As an example, this could come in the form of a more aggressive approach to identify and attract not simply single, stand-alone companies, but industries (like for example the whole sector of REIT’s or S-Chips in the past) with companies within it’s ‘ecosystem’ that can attain a critical mass so that brokers in turn are able to commit resources to for research coverage. Then the education process can follow to engage brokers, remisors and the investment public on this new sector. While it may be easy to list a whole number of reasons for the reduced heart-beat in the local markets here, we believe that the most crippling factor for this listlessness is due to the knock on effects of the penny stock crash in the fourth quarter of 2013. Specifically, when ‘Blumont and gang’ lost a collective $14billion(approx.) in value that fateful week, the stock markets lost more than that amount if we were to factor in the multiplier effect that $14billion would normally have brought. This loss was largely capital belonging to traders most of whom offered the velocity of trades on most days here.
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