STRONGER TRADING INTEREST FROM RETAIL INVESTORS HAS HELPED LIFT THE MARKET BUT WILL IT BE SUSTAINABLE?
Stronger trading interest from retail investors has helped lift the market. But is Singapore Exchange able to sustain its attractiveness for both institutional investors and small players?
Prem Kumar, an undergraduate, recently made his maiden purchase of shares in
Singapore Airlines (SIA) and Genting Singapore after opening a stock trading account early this year. His decision to invest in the Singapore stock market was largely driven by the desire to earn higher returns compared to the paltry interest rate he gets by saving it in a bank.
While Kumar is aware of the risks of investing in the stock market, he reckons that the market dip caused by the novel coronavirus pandemic has turned up attractive opportunities. Even if the stock market were to dip further, he notes that time is on his side. Sooner or later, the stock market will rebound — as it has always done historically.
“I believe we have to take risks at the right time. My parents are more likely to stick with safe choices, but being young, I believe this was the right time,” he tells The Edge Singapore.
Kumar is part of a wave of new retail investors who have helped to reverse the steady decline of participants in the Singapore stock market. This is evidenced by a slew of new share trading accounts opened early this year, according to checks by The Edge Singapore in May.
For one, CGS-CIMB Singapore registered a 32% surge in the brokerage’s account openings for 1Q2020 from the previous quarter. New investors came aboard because of low share prices and attractive returns, according to Raymond Chin, its head of retail. Phillip Securities, one of the more established homegrown brokerages, saw a threefold surge in new applications for the period of January to April, compared to the corresponding period last year. OCBC Securities, on the other hand, recorded a 42% y-o-y increase in requests for account openings between January and March.
This surge in share trading account openings has slowed the process. DBS Vickers notes that on a normal day, the process would take anywhere between five and seven days. But that had stretched to up to four weeks, as the brokerage grappled with a high volume of requests.
Indeed, according to the Singapore Exchange, new CDP (Central Depository) accounts have more than trebled in March and accelerated fivefold in April compared to both months a year ago. In total, the number of new CDP accounts opened in both months reached over 10,000.
Unsurprisingly, trading statistics from the SGX reflected highs that were not seen in recent times. The securities market turnover volume peaked at 39.8 billion shares in March, the highest since October 2018. The securities market turnover value, too, peaked at $48.25 billion the same month, the highest since 2017. The securities daily average value (SDAV) and turnover velocity also peaked at $2.19 billion and 92%, respectively.
Chew Sutat, SGX’s head of global sales and origination, says the figures point to the underlying strength of the Singapore stock market. “If you compare y-o-y or q-o-q, the numbers are very strong. So, it is demonstrable of what I would call latent muscle in the market, which is what people don’t see,” he tells The
Edge Singapore in a recent interview.
‘Smart’ retail
To be sure, more active trading by retail investors is a trend seen not just in Singapore but also in markets like the US. “In the past, retail investors were always buying high, selling low, and always late in the game,” says DBS chief investment officer Hou Wey Fook, referring to US retail investors. “Now, they’ve climbed the learning curve. They are what I call ‘net positive’ for the overall market, and a new force to contend with. What we see in the US, we also see in Singapore.”
There are several reasons for the increased participation from retail investors, Evy Wee, head of financial planning and personal investing at DBS, told The Edge Singapore in May.
“We see both new and younger investors wanting to make investments when stock prices fell earlier in March, whereas existing investors want to rebalance their portfolios to reflect current market sentiment,” says Wee. “More customers have also come forward to set up regular investing plans, while some existing customers have gone on to increase their monthly investment amounts.”
Chew says the market volatility has prompted