Sunday 15 June 2014

The SGX City

Due to home bias, most of us invest only in the local stock market. The state of the local stock market is thus of significant importance to us. Have you ever wondered how the Singapore Exchange (SGX) would look like if it were a city? Assuming that each stock listed on the SGX is a building, and using the price of the stock as the height of that building, I plotted the view of SGX City in May 2014. 

View of SGX City in May 2014
For comparison, I also plotted the view of it in May 2006. 

View of SGX City in May 2006

In comparison, there are several more skyscrapers (namely, Lonza and the 3 Jardine stocks) in May 2014 compared to the solitary one (British & Malayan Trustees) in May 2006. The size of the city also got bigger, from 709 "square metres" (i.e. no. of stocks) to 763 square metres. (Note: The no. of stocks exclude foreign stocks, bonds, Extended Settlement counters, Exchange Traded Funds, odd lots, rights and warrants). While SGX City has grown from May 2006 to May 2014, the heights of buildings in SGX City have not really grown (Note: this analysis does not take into account corporate actions such as bonus issues and dividends, which may reduce the price of the stocks).

Price Distribution in May 2006 and May 2014

Between May 2006 and May 2014, there have been a significant increase in the no. of stocks priced less than $0.10. This has grown at the expense of stocks priced between $0.10 and $0.20 and between $1 and $2. In essence, the average height of buildings in SGX City has got shorter even as there are more skyscrapers. The average height of buildings has grown slightly from 109.7 "metres" (i.e. cents) to 112.0 metres, while the median height has reduced from 28.5 metres to 24.0 metres. In the same period, the Straits Times Index has increased from 2,620 points to 3,250 points, an increase of 24%. The increase in STI reflects the increase in price of the big capitalisation stocks. 

To use a different analogy, the size of the SGX pond has got bigger, by about 8%, but the size of the fish became smaller. While there may be more whales, these are generally beyond the catch of retail investors. Some of the reasons why the average size of fish has got smaller are privatisation and poor corporate governance among some China stocks. Some of the well-known fish that have left the pond includes Asia-Pacific Breweries, Cerebos Pacific, Datacraft Asia, Robinson and Want Want. For a list of the fish that have left the pond since 2009, you can refer to this blog post.

Hence, the next time a stock is up for privatisation, do consider what is left of the pond ;)

P.S. I accepted the privatisation offer for CapitaMalls Asia (partially) and the takeover offer for ASJ Holdings. I will also be accepting the delisting offer for China Powerplus. Please refer to The Last Stand on CapitaMalls Asia for the reasons for these actions. You may wish to refer to Investors' Guide to Privatisation Deals on whether to accept or reject different types of privatisation offers.

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  1. Very refreshing analogy... So we are small fish in big pond then ;-)

    1. Thanks ;) We are the fishermen trying to put fish on the dining table and wondering where the next fish is going to come from.

  2. Very nice blog post.Discussing about the SGX Exchange publicly, considering the market as the sgx city and telling us that share trading can be an exiting task but, actually, it's a boring source of making money.

  3. Your post is helpful, I am always searching for informative information like this. We appreciate your brilliant work please write some on SGX Singapore. Thanks for sharing with us.