A Shifting Landscape in Singapore’s Capital Markets
The financial sector of Singapore has long been at the heart of the nation’s economic growth, with the Singapore Exchange (SGX) playing a pivotal role. Volatility and trading ranges of SGX shares continue to keep traders engaged and drive up volumes, reflecting the broader global shifts in financial markets. Two weeks ago, I had the pleasure of attending the 50th anniversary celebration of the Institute of Banking and Finance (IBF) Singapore, an organisation that has greatly contributed to the development of the country’s financial hub.
Founded in 1974, IBF started as a training institute aimed at developing local banking expertise. Over the decades, it expanded to include sectors such as insurance and asset management. “IBF standards,” a global first, became the framework for financial services, helping build talent pipelines and offer career facilitation through job-matching services. Deputy Prime Minister Gan Kim Yong, who also chairs the Monetary Authority of Singapore (MAS), shared impressive figures, noting that 400,000 individuals have benefitted from IBF’s courses, and nearly 2,000 financial professionals have been supported through talent development schemes.
Over the years, Singapore’s financial sector has faced significant transformations. Deregulation in 1999, the rise of global competition, and the introduction of digital platforms have reshaped the landscape. Many market participants have adapted, while others have struggled, failing to upskill or pivot towards emerging fields such as sustainable finance, mergers and acquisitions, or AI-driven financial services.
Honoring the Best and Preparing the Next Generation
At the IBF event, I was proud to witness the conferment of five new Distinguished Fellows and 27 new Fellows, several of whom are close friends. Additionally, 54 promising students received the IBF Golden Jubilee Scholarships, marking a bright future for the financial services sector. Companies like BlackRock have also embraced young talent, offering full-time roles to polytechnic graduates who excelled during year-long apprenticeships.
While many in the industry have embraced new opportunities, the financial markets have continued to evolve. Notably, the Straits Times Index (STI) has been performing remarkably well. The “September surprise” predicted earlier this month saw the STI close 10% higher on Friday the 13th, achieving a six-year high. Data from SGX strategist Geoff Howie shows an annualized return of 5.5%, with net inflows of $700 million into the local market since the beginning of September.
Technical chartists have set an optimistic 3,800-point target, bringing it close to the all-time high of 3,870 achieved before the 2008 Global Financial Crisis. As always, there are mixed views on market movement, with some cautioning a potential pause in this rally.
Capital Market Ecosystem and the Role of Public-Private Partnerships
A crucial element for the sustained success of Singapore’s capital markets lies in addressing the demand deficit—a lack of sustained institutional demand. This is a problem that cannot be solved by the government or SGX alone. It requires a concerted effort from both public and private players. If addressed properly, there’s hope that local retail investors will steer away from speculative markets like cryptocurrency and bring their capital back to domestic investments.
As the market approaches the final weeks of Q3 2024, there is anticipation surrounding the Federal Reserve’s expected rate cuts. Personally, I’ve sold off some of my STI ETF positions, taking a gross return of 7% in August. However, I remain cautiously optimistic, predicting potential volatility ahead of the upcoming US elections in November.
The Rise of Laggards and REITs
In recent months, lagging stocks like Keppel Corp, Sembcorp Industries, and Singapore Post have started catching up with their counterparts. Additionally, the REIT sector, known for its sensitivity to interest rates, has shown signs of recovery. Analysts forecast a 15% upside in the REIT index, which broke above 640 points last month. With long-suffering REIT portfolios finally rebounding, this sector appears to be on an upward trajectory.
As with any recovery, there will be bumps along the way. However, I believe now is the time to shift away from underperforming assets and focus on those with strong fundamentals. Singapore’s capital market is entering a new phase, but success will depend on our ability to adapt to an uncertain global financial landscape.
A New Dawn for Singapore’s Financial Markets
While my career in the industry may have come to a close, I remain optimistic about the future of Singapore’s capital markets. With the right collaboration between private and public sectors, the country is poised to overcome its challenges and continue its role as a global financial powerhouse.
