Ways to enhance market liquidity

AMONG the problems the local stock market has been struggling with for many months now, perhaps the most pressing is low liquidity. Even though this is not confined solely to Singapore - according to data compiled by the World Federation of Exchanges, equity trading turnover in local currency in Australia was down 11.4 per cent year-on-year for the first half of 2014, 20 per cent in the Philippines and 13 per cent in Shanghai - it is worrying that in the Asia-Pacific region, the 33 per cent first half year-on-year fall recorded on Singapore Exchange (SGX) is surpassed only by the 40 per cent drop registered in politically troubled Thailand.

Part of the "blame" for this rests with a reversal of the ultra-accommodative monetary policies that central banks have been pursuing over the past few years, while the recent spike in geopolitical risk caused by problems in Ukraine and the Middle East is also a factor.

Locally, investor confidence has been dented following last October's penny-stock crash and this is manifesting itself in daily volume. Retail players, hit hard by that crash, have yet to return in force.