Is the local stock market dead?

An extract taken from the taken from the Business Times (Weekend, 21 Aug 2021).

When I read the article “Once beaten, twice shy” on the Business Times (Weekend) today, which mentioned about Ken, a veteran stock investor since the 1990s. I can’t help but somewhat agree that the Straits Times Index (STI) did not really perform very well over the past 30 years. It was 1,153.5 on 2 Jan 1991 and by the close of yesterday, 20 Aug 2021, it was 3,102.75. From point-to-point, the increase was only 2.69 times. Comparatively, the Dow Jones Industrial Index (DJII) had advanced 13.3 times from 2,633.66 to 35,129.08, and the NASDAQ at 39.5 times at the close yesterday. Even the Hang Seng Index, recently being battered by a series of regulatory measures from Beijing, had advanced 8.2 times from 3,031.0 to 24,849.72 at yesterday’s close.

Here we are talking about the big blue chips that are the constituent stocks making up the STI. These are the most profitable companies listed on the Singapore Exchange. If Ken, the character in the article, holds SGX stocks outside the STI-component stocks, the probability of capital gain is even lower.

  • Not many multi-baggers

Over the past 30 years or so, there are only a handful of multi-baggers. Of course, if our timing is perfect, we can hit a few multi-baggers in some super-penny stocks, but even that a lot of them are not able to maintain their highs, sliding down almost as fast. Medtecs Investors in the mid-cap space is a good example. iFast, Frencken and Wilmar International made the grade of multi-baggers. Nanofilm almost made through, but the recent sllde had defied it. Going back into the 90s till now, perhaps OCBC is one of them. Furthermore, OCBC made a share split in 2005 and should have at least doubled by today. DBS could also be a 3x-bagger if one gets his timing right by buying it during the global financial crisis. It hit its all-time high just ten days ago, but was quickly pulled back even to below $30 level before regaining some terroitory to above $30 as of yesterday. There could have more, such as OSIM and Cerebos International, but they have all been de-listed. So, on the whole, there are really not many multi-baggers. Even that, we need to be pin-point accurate in our timing in buying and selling them.

  • The deteriorating companies

On the contrary, in the past 10 years of so, investors were hit by companies deteriorating at such a great speed that there were no escape routes. Jiutian Chemical, Oceanus, Cosco International, Midas International and Hyflux are good examples. Their retreats were easily several hundred percent. If the list is not long enough, there are also others in the $5 to $10 range such as SPH, Sembcorp Industries, Sembcorp Marine, Keppel Corporation and SIA. In fact, there seemed to be more deteriorating companies compare to the up-and-coming ones.  

(C)  The Catalist

The secondary board, which is the nursery for budding companies before they make it to the main board has equal share of corporate issues. Quite a number of this list of companies have been embroiled with corporate governance  and key management issues. In fact, quite a number of them have been on the news lately and were already on the suspended list. Furthermore, most of the counters are so illiquid that there is hardly one trade in a day. In my opinion, to gain significantly from the stocks in the Catalyst is certainly near-impossible task.

In fact, the Singapore market is more of a dividend market. Most investors see the SGX stocks as an alternative to fixed deposits. It could be for that reason, the Real Estate Investment Trusts (REITs) and business trusts thrive very well here. Once upon a time, the perpetual bonds and corporate bonds, were selling extremely well here as well, driving herds of investors to park their funds in them. They have all evaporated when oil price crashed in 2015 leading to a huge chain of bond defaults in 2016. Most of the related shares have been suspended even today locking-in the shareholders’ fund.

On the whole, there are really not many investable stocks on the SGX for capital gains. Apart from the banks and a handful of multi-bagger stocks, capital gains on SGX stocks are not exactly significant. Most of the capital gains come from buying at a well-timed price weakness, quite unlike the widely known US stocks that gained exponentially since their IPO. The REITs, generally, do not enjoy significant capital gains but the generous dividends help substantially by enabling investors to  increase their holding units. Ken’s loss is huge but not impossible. It is not known if the $300k loss has included the stock dividend. If not, the dividends accumulated from the 90s till now would helped a lot in offsetting the loss.

Brennen has been investing in the stock market for 30 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is the instructor for two online courses on InvestingNote – Value Investing: The Essential Guide and Value Investing: The Ultimate Guide. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

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