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Quiet S'pore market sends retail investors' funds overseas
WHEN the Singapore market stagnated, retail investors poured money abroad.
Statistics from Maybank Kim Eng's Singapore office to The Business Times showed that the total traded value of all foreign shares at the broker rose 38 per cent from 2013 to 2014. The top four markets by growth in traded value were China, Thailand, Hong Kong and the US - in that order.
Yeo Leong Hui, head of market development at broker OCBC Securities and its iOCBC Internet trading platform, said in a statement that in the first three months of this year, the value of overseas trades increased significantly over the same period last year.
"In particular, transactions involving the Hong Kong and US markets are contributing a growing share to the total value of foreign trades... Overall, we expect revenue contribution from foreign trades in 2015 to exceed that of 2014," he said.
Education and training seminars have successfully raised awareness and knowledge about foreign markets among clients, he added.
Maybank Kim Eng Singapore's chief executive Harmeet Bedi said in a statement that investors were drawn to the Hong Kong and US markets out of familiarity with them, and also because the brokerage provided multi-currency margin financing for both. For Maybank Kim Eng, traded value for US and Hong Kong rose more than 40 per cent each year-on-year in 2014.
The US market provides big-name initial public offerings (IPOs) and a wealth of information to investors, Mr Bedi said. "Hong Kong is also attractive as a means to gain access to the China market. At the same time, it maintains high standards of governance, which provides assurance."
The S&P 500 index in the US rose about 11 per cent last year, after a 30 per cent jump in 2013. The Hang Seng Index was relatively flat in both years, but China stocks listed in the Hong Kong market are enjoying a tailwind from a rally in China's markets.
Retail investors wielding leveraged money in China returned to the market late last year. The Shanghai-Hong Kong Stock Connect scheme, which linked the two markets late last year, also led to Maybank Kim Eng experiencing a multifold increase in China traded value.
Meanwhile, the Thai market sprang to life in 2013 and last year, following political instability in the country. It was up 15 per cent last year.
David Gerald, chief executive of local investor lobby group Securities Investors Association of Singapore (Sias), said he is aware of the trend of some investors going into the US, UK, Hong Kong and China.
"They are looking for better returns. That's fine, so long as fundamentals are correct," he said.
However, he cautioned that investors have to ask themselves whether they are represented overseas and can seek legal redress.
"Investors have to live with losses, especially in China, where there is little development in transparency. Companies do get into trouble," he said.
Jimmy Ho, president of the Society of Remisiers of Singapore, said that he has had clients crossing over to the US market for a couple of years.
"As long as the market is volatile, there's something to play," he said. He noted that some broking houses take more risk than others in terms of credit lines granted.
Helping clients trade overseas does mitigate the income slowdown from the Singapore market for remisiers, he said. "I won't hesitate to encourage remisiers to move and start serving their clients in overseas markets ... Most clients are understanding, they don't want to stay up late," Mr Ho said.
Last year, the Singapore market had a turnover of 502.4 billion shares, down from 898.7 billion shares the year before; traded value fell to S$265.8 billion last year from S$354.8 billion in 2013.
The benchmark Straits Times Index (STI) was up 6.2 per cent in 2014, which analysts attributed mainly to takeover activity. The STI was flat the year before.
This year, however, has been a time of recovery for SGX. First-quarter statistics showed a slight year-on-year improvement in value traded, even though volume traded had almost halved.
Maybank Kim Eng Singapore said that as of mid-April in the year to date, foreign shares accounted for about a fifth of the total traded value; this proportion has risen sharply in the past few years.
In response, the brokerage had introduced a multi-currency electronic payment service and a multi-market regular investment plan. "We believe this trend of investors looking outwards will continue," Mr Bedi said.