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What happened to the market's mojo?

Speaking to dealers who have been in the business for years can be an instructive experience. One recently declared that "the Singapore market has lost its mojo'' and another, a week or so earlier, said to me that "these days there is no such thing as 'investing' in the stock market, instead, there's only 'trading' in the stock market''. On reflection, it occured to me that the two observations are not unrelated.

The first quote about the market's mojo assumes that there was mojo to begin with and that having mojo is desirable. I could debate this point - to some people, having mojo means having stocks that can double in a few days which may not necessarily make for a healthy market - but without getting bogged down with semantics and technicalities, I think I understand what the dealer was trying to say, namely that a spark has disappeared, taking with it liveliness and excitement. This was the undertone of the letter to finance minister Tharman a few months ago which I wrote about in an earlier blog posting, that retail interest in Singapore stocks appears to have gone and the longer this goes on, the worse things will be.

The second point deals with an age-old question, namely whether there really are differences between investment, speculation and short-term trading, I think the separating lines are very narrow and blurred, certainly not as clear cut as text books would have us believe. You might think that holding for the long term is investment and intraday punting is speculation but I'm not so sure anymore having observed the local stock market for the past 23 years.

Furthermore, with the advent of high-speed computerised trading, very few people can trade successfully these days, a task made all the more complicated by all sorts of derivative instruments like warrants, options, futures CFDs etc which "manipulate'' prices all the time. To be honest, I don't think the Straits Times Index is a particularly good gauge of how the overall market is performing at any given point in time, though to be fair I think the same might be said of the major indices on Wall Street or in Hong Kong. But I digress.

The point is that has the loss of market mojo to do with how short-term investment horizons have become? In other words, if all players in the market are simply traders and speculators in it to make a quick buck, would the logical outcome eventually be a loss of mojo, liquidity or whatever label you might choose in place of "excitement''? Because at the end of the day (a phrase I shudder to use but I can't think of a better one) if you lose money holding on for the long term and switch to short term trading and then lose money again because you're up against superfast computers, then you'd probably come to your senses quickly and abandon trading altogether.

Is this why the local market finds itself in its current funk?