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DOES the state of the local stock market have any impact on general elections in Singapore?
Charting the performance of the Straits Times Index (STI) through past elections shows some correlation.
The observable pattern that emerges is that whenever the index had been broadly gaining in the years before elections, the vote share of the ruling party declined. The opposite also appears to apply - if the stock market had been in a downtrend, the incumbent's vote share grew.
Economists said that in general, times of market uncertainty have historically been linked with a bigger vote share for the ruling People's Action Party (PAP), which has been in power since Singapore achieved self-government in 1959. Over the past six rounds of general elections in Singapore from 1988 to 2011, the PAP has secured a vote share ranging between 75.3 per cent in 2001 and 60.1 per cent in 2011.
UOB economist Francis Tan told The Business Times that historical STI data seemed to suggest that whenever the benchmark index gained ground in the period before the polls, the eventual PAP vote share declined from the previous general election (GE). For instance, the ruling party's 60.1 per cent vote share in May 2011 - down from 66.6 per cent in May 2006 - was when the market was bouncing back up after the global financial crisis in 2008 to 2009, he said.
Another interesting indicator was the STI's year-on-year percentage change as at the last trading day on or before Polling Day. Mr Tan found that a similar pattern showed up - namely, if the STI had climbed year on year, then the incumbent's vote share that round tended to be below the previous round's.
The opposite applied too. One example was the November 2001 GE, when the PAP grew its vote share to 75.3 per cent from 65 per cent in 1997. The STI had fallen about 24 per cent year on year as at the end of November that year, he noted. That was also after the shock of the Sept 11 terror attacks in the US.
These trends could be related to increasing risk aversion in times of uncertainty, Mr Tan said. "The psychology is that when you're getting hit, you want to look for some pillar of strength that has stood the test of time. When facing loss, people tend to avoid change."
CIMB Private Bank economist Song Seng Wun also said that the limited historical data for Singapore elections do seem to support the theory that in periods of uncertainty, the incumbent's vote share could increase. The PAP also has a longer track record than other parties, he added.
But Mr Song said that the link between market conditions and election results in Singapore was rather nebulous and that the two were more likely to be independent of each other.
"In Singapore, you're never really in a situation where, when you go to the polls, the economy is so bad," he said. "And if there's any downturn, the policy response is immediate so you don't have an impact that lingers on."