~ By Narayana Narayana ~
I refer to the Hock Lock Siew article "STI hitting 3,000 or not: It's no big deal, really" which was published in the Business Times of 27 March 2012.
The STI-3000 level may understandably appear blase to the experienced writer, with his decades of involvement covering the stock market, but his facetious comment that it is regarded as the 'Holy Grail' by a host of others newer on the scene is not too far off the mark.
In fact the Straits Times goes into panegyrics, with blazing headlines, each time the STI hits 3000. Not to be left out among the campfollowers are the chartists, regarded by many market players as 'Pied Pipers' whose tunes mesmerise them into tagging along. As the STI index itself is traded, it is inevitable that its movements will be subject to manipulation by the involved parties themselves. In fact, the composition of the STI leads many cynics to argue that this almost always happens, if nothing else, at least to serve the vested interests of a powerful minority.
But this is nothing new. From as long back as I can remember, stock prices have been largely determined by a sort of 'poker strategy'. In earlier days, representatives from each broking firm would meet at 5pm on market days (and, if my recollection is not wrong, 1 pm on Saturdays) along with journalists from the press, at the office of Fraser & Co., then indisputably the numero uno among stockbrokers, for what was termed, curiously (or appropriately?) enough, 'price fixing'. These were published the next day in the papers as a guide of sorts to investors. Crudely put, the prices set at those sessions were determined by whoever had the biggest clout, and for whatever reason, to set a price favourable to his interests.
All the changes that have swept through the market over these intervening six decades fill me with a sense of deja vu, and as that classical French phrase goes, 'plus ca change, plus c'est la meme chose' (i.e. nothing really changes).
How Singaporean is the STI?
How representative really is the much-followed STI of the Singapore marketplace and economy it is supposed to mirror? The inclusion of no small number of 'FTs' (and in non-Singapore currency, to boot) can hardly assist in giving an accurate portrayal of a wholly Singaporean market-place. On most days, activity stays directionless in a 'Waiting for Godot' scenario, only going into overdrive towards closing time, often with marked spillover into that small frame of 'extra time'. A good example was 29 March 2012 when the STI was shilly-shallying in the 3,000+ territory for the greater part of the day only to surrender that coveted fort when trading ended.
All empirical evidence points to the fact that this 'psychologically-important key-support STI-3000 level' cannot be allowed to fall (much like Singapore in 1941/2) and the modest rise in the DJIA on 30 March 2012 after earlier weakness added confidence to market sentiment. And with it being the last trading day of the first quarter, and coincidentally for many, including governments, almost the close of a fiscal year, 'window dressing' was therefore a traditional 'must' it seems.
All things considered, perhaps there is a strong case for yet another revamp of the components of the STI with only local companies in it to make it wholly representative (as one would be inclined to presume from the 'ST' part). Far too often it is reported that wild swings of foreign but locally-quoted companies, and in non-S$, were responsible for big fluctuations in the STI. It would be interesting to know how actively in fact these 'FT' counters are traded by the larger number of investors in Singapore itself to ascertain that the STI is a meaningful guide/tool for the investment purposes of local investors. Or are their interests largely 'expendable'?
As for the continuous flirting with that 'Holy Grail STI-3000', I am reminded of the nursery rhyme 'The Grand Old Duke of York' (below) which may amuse investors with its close parallel to STI-3000.
"Oh, The grand old Duke of York, He had ten thousand men;
He marched them up to the top of the hill, And he marched them down again.
And when they were up, they were up, And when they were down, they were down,
And when they were only half-way up, They were neither up nor down."
Headline photo courtesy of The Digerati Life