Stock Market: GIC Should Not Allocate Funds to ‘Pump-Prime’ the Market
Straits Times Index Reaches New High, But Is It Worth Celebrating?
The Straits Times Index (STI) reached a milestone early last week, hitting a new all-time high of 3,921.30. This surpassed the previous record high of 3,906.16 set in October 2007, according to the Singapore Exchange (SGX).
Driving Factors Behind the Surge
One factor that drove the STI to its new high was a surge in shares of DBS, OCBC, and UOB – which account for more than half the index. In particular, DBS crossed the S$46 threshold after another strong earnings report.
A Cause for Concern
For me, this did not feel like an event worth celebrating. While the STI is essentially unchanged since just before the global financial crisis, the S&P 500 index has more than quadrupled. Is it any wonder that delistings have outpaced new listings on the local bourse for years?
A Missed Opportunity
The STI did not mark its new high on Monday with much conviction. By the end of the day, it slipped back below the 3,900 threshold. It closed on Friday at 3,877.5.
Conclusion
In conclusion, while the STI’s new high may be a milestone, it is not necessarily a cause for celebration. The lack of conviction in the market and the dominance of a few large-cap stocks raises concerns about the overall health of the market. Instead of allocating funds to "pump-prime" the market, another vehicle should be formed to seize the economic benefits of a more vibrant local market ecosystem.
Frequently Asked Questions
Q: What drove the surge in shares of DBS, OCBC, and UOB?
A: Strong earnings reports and other market factors.
Q: Is the STI’s new high a cause for celebration?
A: Not necessarily, as the market’s lack of conviction and dominance of a few large-cap stocks raise concerns.
Q: What is the significance of the STI’s new high?
A: It marks a milestone, but may not be a sustainable or broad-based market trend.
Q: Should GIC allocate funds to "pump-prime" the market?
A: No, another vehicle should be formed to seize the economic benefits of a more vibrant local market ecosystem.
