SGX share price generated 588% returns!

Crisis? What crisis? SGX share price laughed off talks of impending recession as it turned bullish amid the ongoing virus outbreak. Traditionally, SGX share price is not a safe haven against crises but volatility in the stock market is good for stock market operators like SGX because of the increased in revenue from clearing fees.

In fact, if you purchased 1000 shares of SGX shares in November 2000 and held it till now, the returns would be an incredible 588% based on current SGX share price of $9.22. I don’t know which stock that had generated so much returns for investors and is not affected by the current coronavirus.

Even more bizarrely, SGX share price actually benefitted from the ongoing crisis as market turnover for equities and exchange-traded funds jumped 44% and 245% respectively in February. The market volatility also saw increased interest in daily leverage certificates and structured warrants. The number of monthly active participants climbed 55% year-on-year, while the outstanding value of leveraged products held surged three-fold.

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Indeed, coronavirus had destroyed thousands of lives and upended various industries. Most blue chips suffered carnage as investors fled for their lives and dumped their holdings. In this regard, many investors may argue that fundamental analysis is useless during massive market corrections because investors will sell indiscriminately anyway. While I do not disagree with this argument, the performance of SGX share price may confound critics.

SGX share price

Year to date, SGX share price had increased from $8.86 to the current $9.17. While the 3% increase of SGX share price is not something to shout about, such performance is certainly impressive given the current climate. In the context of the unfolding crisis, is the current bullish form of SGX share price sustainable? Should investors buy into the narrative for SGX share price? If so, what are the key metrics that investors should look out for when assessing the value of SGX share price?

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in SGX before. Whether SGX share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Rationale for SGX share price performance

Under current environment, there are a few factors that really swing in favour of SGX share price. In good times, people will buy into equities and drive up trading volume. In bad times, people will sell equities and also drive up trading volume. For both circumstances, SGX will always emerge as the biggest winner. In February 2020, the total securities market turnover value increased 44% year-on-year to $27.5 billion, while securities daily average value (SDAV) gained 30% year-on-year to $1.4 billion.

SGX is one of the few listed companies in Singapore that carry no debts or borrowings. In view of this, SGX share price is immune to financial crises because borrowing default or bankruptcy is not a concern.

SGX share price had been flying since the release of FY2019 results in August 2019. SGX share price had been bullish because net profits had surged from $349 million in FY2016 to $391 million in FY2019. Then in February 2020, the bourse followed up with another stellar financial performance which saw revenue and net profit increasing 3% year-on-year.

Will SGX share price hit the giddy level of $10, a level last seen in 2010? Much of it will depend on [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: April 3, 2020 — 12:08 am

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