What seemed a temporary dry spell for the local stock market early this year has turned out to be a more persistent drought.
Trading activity fell in the first six months of the year after a string of companies were taken private, but analysts predicted a pick-up in the second half.
However, listings of new companies and the trading of existing ones on the Singapore Exchange (SGX) have continued to languish, with several mainboard initial public offerings (IPOs) flopping soon after their debut and investors staying away.
Offshore and marine firm EMAS Offshore has seen its share price drop by as much as 44 per cent since its debut on Oct 8. On the Catalist market for smaller firms, the share price of marble producer Terratech has slid as much as 66 per cent from its July IPO price of 60 cents.
Over the past two months, the daily number of shares traded has been hovering around multi-year lows.
On Nov 5, just 998 million shares were traded, the fewest since January 2012 and a far cry from the multi-billion figures that were commonly seen just a year ago, according to data from financial portal ShareInvestor.
And though the local stock market has traditionally taken its cue from the United States, it is now lagging behind even as Wall Street reaches record peaks.
The local benchmark Straits Times Index continues to hover around the 3,300 to 3,400 level, well below the 3,800 range in October 2007 before the global financial crisis.
Temporary glitch or longer-term malaise?
Meanwhile, there have been recent hiccups at the bourse, which has just emerged from a costly two-year revamp.
In February, a glitch prevented investors from accessing its Web portal for most of one trading day. And on Nov 6, its $250 million trading system went down for three hours in the worst market meltdown since 2007.
The bourse has put the disruption down to power supply issues but the root cause has yet to be found.
Traders also remain spooked by the abrupt penny stock crash in October last year, which wiped out nearly $6 billion in market value in just one day.
The crash, which is still being investigated by regulators, made investors "a lot more cautious", particularly about small- and mid-cap firms, said CIMB Research director Song Seng Wun.
"There's a lot less risk-taking. Without that risk appetite, market volumes become very thin."
All these incidents have not helped sentiment among remisiers. Some have even started a petition to get SGX's chief executive Magnus Bocker to step down. The document garnered some 500 signatures within a few weeks.
But brokers in the main do agree the main culprit behind the tepid local market is a lack of confidence among ordinary investors that they can make money from stock trading at all.
For one thing, there are few catalysts for share price gains in the near future, noted Mr Song.
Economic restructuring has driven up labour costs and weighed down earnings for companies here, while a weak global economic environment has hit firms with overseas exposure.
DBS Group Research said in a report last month that apart from banks, most other sectors here have suffered falls in earnings.
There are also concerns over the quality of recent listings on the bourse.
Barely two months after making a fairly solid debut, Indonesian farming firm Japfa posted in late October a shocking 90 per cent plunge in earnings at one of its main subsidiaries.
This was followed by the last-minute cancellation of a planned listing of taxi company Trans-Cab, after a whistleblower flagged potential problems over insurance payments.
Another reason for waning interest from retail investors is that they have mostly not benefited from the IPOs that did well this year.
These are mainly small Catalist-listed companies, which offered few or no IPO shares to retail investors, shutting them out from first-day trading gains.
Examples include Zico Holdings, whose share price jumped 72 per cent on its debut, and MS Holdings, which saw its stock rise 54 per cent on its first day.
Neither offered a retail tranche in their IPOs, citing the higher expenses of doing so.
"Retail investors are being neglected," says remisier S. Nallakaruppan, who has been in the business for two decades.
Mr Jimmy Ho, president of the Society of Remisiers, says: "Last time, the feeling was that (you) could earn money through IPOs. If you got IPO shares, it was like tio beh pio (striking the lottery)... This had been a way to attract and encourage retail investors to stay in the market.
But now even that has been taken away."
Drawing retail investors back
To their credit, SGX officials have made efforts over the past few months to get retail investors interested in trading again.
They have been engaging stockbrokers more closely, by furnishing them with more information to analyse share price movements and holding at least 22 roadshows since October to showcase these new tools.
The SGX is also shrinking the size of the minimum purchase "lot" for stocks from 1,000 to 100 shares, starting from Jan 19. This would make blue-chip stocks - large companies that have strong financials and a solid track record - a lot more affordable.
OCBC Investment Research head Carmen Lee noted that the main investors in blue-chips are funds and millionaires, and making them more accessible could help more retail investors afford them.
Mr Harmeet Bedi, chief executive of brokerage Maybank Kim Eng Singapore, said that while "investor appetite is blunted for now", he believes it will pick up again because SGX's measures will boost investor interest.
The Securities Investors Association of Singapore (Sias) has also chimed in with its suggestions on how to revive the market.
Sias suggests aligning remisiers' commissions more closely with the performance of their clients' investments, rather than basing them on the dollar amount of each transaction. This may encourage remisiers to help their clients invest better.
It is also opportune for the SGX to relook the systems it has in place to spot irregularities, both before and after a company lists on the exchange.
Although Trans-Cab's issues were caught in time, the bourse has yet to explain how Japfa's profit plunge went unflagged.
Also, the exchange had proposed back in October 2012 to impose a minimum 5 per cent retail tranche, though that proposal has not been implemented.
Mandating a minimum retail tranche for new listings may drive some companies to list elsewhere, which the exchange may rightly be wary of.
But exploring alternative ideas, such as giving companies incentives to offer a certain minimum retail tranche, would allow retail investors to benefit from IPO gains and draw them back into the market.
It may be an uphill task for the exchange to attract small investors back to an arena perceived to favour the big boys. But efforts to level the playing field for retail investors will surely make for a healthier and more active market in the long run.
This article was first published on Dec 2, 2014.
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