Is the S'pore stock market as bad as it's made out to be?

The Singapore Exchange (SGX) has come under much scrutiny lately, with a high-level committee formed in August to study ways to stimulate interest in a market that is often criticised as boring, lacking in liquidity and therefore unable to attract exciting new listings.

- David Gerald

These are the reasons usually cited for why younger investors are shunning local stocks in favour of other markets like the United States, or more volatile assets like cryptocurrencies.

But is it really the case that the local market has no redeeming features, and everyone should be looking elsewhere for decent investing opportunities?

There is no denying the blows to investor confidence from the collapse of Singapore-listed China stocks, or S-chips, due to accounting issues and poor governance from 2003 to 2008, and the 2013 penny stock crash.

This has led to the drying up of liquidity and a lack of good-quality initial public offerings on the local bourse.

Yet, concluding that the local stock market is wholly unattractive with nothing going for it is wrong because it is focusing on only one side of the coin.

Since the Securities Investors Association (Singapore), or Sias, was formed in 1999, the market has evolved from one governed by a merit-based framework to one based on disclosure and caveat emptor, or buyer beware, where the onus is on buyers to tread carefully before buying.

Throughout this evolution, there is one overriding feature of the Singapore market that has stood out and could stand it in good stead in the months and years ahead: It is a relatively safe haven in times of high volatility.

This reputation as a safe haven was born decades ago because of the high dividends paid by companies that include the then listed Singapore Press Holdings, the three banks and various other blue-chip stocks, most notably those linked to Temasek.

It was reinforced when real estate investment trusts (Reits) began trading, starting with CapitaMall Trust, which listed with a yield of 7.06 per cent in 2002.

Today, the Reit market here is the second largest in Asia outside of Japan, and as at June 2024, the average dividend yield of the 40 Singapore-listed Reits stood at a respectable 8.1 per cent.