Darkest before the dawn
IN the six years since the global financial crisis, the Singapore market has taken on some characteristics of the typical Singaporean: not too excitable, mostly honest, gets the job done.
Yet after the penny stock crash of October 2013, less-flattering words have been used to describe the market, with adjectives like "comatose" and "moribund" thrown around as if the market was a flightless bird slowly waddling towards extinction.
Half the 800 stocks on the market are currently inactive. Daily securities traded values, too, have halved to under S$1 billion since a few years ago.
It is an understatement to say there are some challenges facing those who want to make a living in the hurly-burly of markets.
Hopes will be high that Singapore Exchange's (SGX) incoming CEO Loh Boon Chye, a well-known, unassuming Singaporean banker apparently known as the "flow monster" in some circles, can do something to fix that. A veteran hand in Asia for Deutsche Bank and most recently Bank of America Merrill Lynch, Mr Loh will be undoubtedly an asset in SGX's efforts to internationalise and attract bigger listings to Singapore's shores.
A key issue is the stock market.
Current CEO Magnus Bocker has done much to build the derivatives business. Aided by the China rally, derivatives brought in a whopping S$80 million of revenue for SGX in the first quarter this year. It left the traditional securities business, which brought in S$53 million, in the dust.
Yet derivatives trading happens mostly hidden from the public eye. Equity market index futures and commodities options, futures and swaps are not the kind of financial market instrument that laymen have access to.
What captures the imagination is the rise and fall of businesses, encapsulated in the stock price.
The excitement of a big-name initial public offering gets people talking.
Market volatility will draw people back in.
Because let's be honest with ourselves: sometimes the typical Singaporean is not satisfied with his sedate, cloistered existence.
He wants to make a quick buck.
However, if he loses a lot of money you can be sure he will raise a hell of a big fuss.
Within the Singaporean character could be a hint of what lies ahead for Mr Loh.
His advantage, compared to Mr Bocker, is that he seems more likely the man who can build bridges with the retail market.
His challenge is how he can pitch Singapore's stock market as an attractive place to trade in. Singapore is too small a player on the developed market index benchmarks to benefit from any rebalancing or asset allocation flows. On the flip side, Singapore is not exactly an emerging market either, which would attract developed market investors looking to diversify into faster-growing places.
A big local company in Thailand, Indonesia or the Philippines would rather list in their domestic bourses. A regional player with exposure to China has no reason to list in Singapore to trade at 10 times earnings when it can list in Shanghai or Hong Kong and trade at 50.
So Singapore, despite it being a decent yield market trading at historically average valuations, gets shunted aside.
As with all quality things that get ignored in the financial markets, it is only a matter of time before attention snaps back.
And when that happens - not a small likelihood given the sheer amount of cheap money sloshing around - Singapore's stock market will come back with a vengeance.
On Monday, as Mr Loh's appointment by the SGX was announced, news also broke that both co-CEOs of his former employer, Deutsche Bank, resigned.
It was Deutsche Bank, not just Mr Loh, which was also known as the flow monster for buying and selling a lot of fixed income, currencies and commodities products. The bank's business grew so big that risk management became a problem, among other things.
It is darkest before the dawn, it is often said. But market players have to be careful of what they wish for.
READ MORE: SGX names veteran banker Loh Boon Chye as its new CEO
