Friday, January 11, 2008

Roller-coaster ride ends in bull run

Jan 10, 2008

1,073.47 (Jan 12, 1998) - lost nearly half its value in six months

GLOOM and doom engulfed East Asia during the region's dark days, which began with the devaluation of the Thai baht in July 1997.

The financial maelstrom saw the STII shedding almost half its value in six months. It plunged from about 2,000 points in July to 1,073.47 on Jan 12, 1998.

Few buyers dared to venture into a market spooked by regional jitters and uncertainty over how long the crisis would last.

Senseless and excessive selling was seen, as foreign fund managers pulled out of Asian markets in droves.

For instance, $39.1 billion was wiped from the Singapore stock market in 1997 due mainly to the financial meltdown.

However, there was some respite for the index during this traumatic voyage.

This was most notable on Feb 2, 1998, when the STII recorded its biggest single-day surge. It leapt 14 per cent or 173.07 points to 1,432.99 on a frenzy of liquidity-driven buying.

But the index was jolted after Malaysia imposed capital controls in August that year. The shock measures, plus moves to centralise the trading of Malaysian shares in Kuala Lumpur, caused a widespread selldown here.

At one point, Malaysian shares traded on Clob International were sold at discounts of up to 78 per cent to their prices on the Kuala Lumpur Stock Exchange.

The panic caused the index to plunge to a 10-year low of 805.04 on Sept 4.

885.26 (Aug 28, 1998) - at the time the index was revamped

AFTER more than 30 years, the 30-stock STII made way for the 55-stock Straits Times Index (STI) on Aug 31 that year.

It made its final bow at one of its lowest levels for that decade - at 885.26 points - after the battering it took from the Asian financial crisis.

Critics of the STII said fund managers had long ignored the old index, claiming that it gave a one-dimensional view of the market. It consisted of only 30 industrial stocks and its price-weighted nature made it vulnerable to manipulation.

That set the stage for the market value-weighted STI, which started at the STII's final closing level to ensure continuity.

Out went 13 counters, which included illiquid ones such as Haw Par and Singatronics, and in came 38 new stocks.

It was also a more all-encompassing index, which included among its entrants banking counters such as DBS Group Holdings, United Overseas Bank and OCBC Bank, property plays such as City Developments and Hongkong Land, and technology stocks such as Creative Technology.

2,582.94 (Jan 3, 2000) - after soaring 85 per cent in 1999

THE technology revolution and globalisation wave plus a cyclical recovery in Asia after the financial crisis sparked a surge in investor confidence.

These factors helped to fuel the bull run of 1999, when the STI charged up a whopping 85 per cent for the year. Investors had added reason to celebrate on Jan 3, 2000, when the much-feared Y2K bug failed to surface.

The boom also saw Singapore's Pacific Internet making its successful debut on Nasdaq in February 1999. With three million shares issued at US$17 each, the counter opened at US$88 before easing to end at US$48.

Recalling those halcyon days, an analyst said: 'It was like a magic youth potion - anything couldn't go wrong. It brought the STI from despair to euphoria.'

Technology and electronic stocks in Singapore had a field day, buoyed by the Nasdaq's super-charged run and the global optimism regarding those sectors. That saw Creative shares soaring past the $50 mark in early 2000. At their peaks, Venture and Chartered Semiconductor hit $28.90 and $18.50 respectively.

The bubble started to burst around March 2000 following a sharp selldown on Nasdaq. Eventually, more than US$5 trillion (S$7.2 trillion) in the market value of tech firms worldwide was wiped out from that month to October 2002.

The STI was not spared, dropping from 2,582.94 in January 2000 to around 1,800 in May 2000 and ending the year just above 1,900.

1,241.29 (Sept 21, 2001) - down more than 20% in 10 days

THE Sept 11 terrorist attacks in the United States sent shockwaves around stock markets worldwide, and the STI took a belting in its aftermath.

CIMB-GK's Mr Song Seng Wun recalled the mayhem: 'We were overwhelmed by the many phone calls that lasted through the night, and were prepared for a massive market meltdown the next day.

'It was the first terrorist attack live on prime-time TV here.'

Just a few days before the attacks, the STI was trimmed from 55 component stocks to 45, and changed from a value- weighted index to one based on a free-float method.

The attacks gave the new-look index a nightmare start. By Sept 21, the STI had lost more than 20 per cent, falling to 1,241.29 points.

Stocks that were badly hit then included Singapore Airlines, which nosedived by $3.55 to $7.45 in that period.

That month, the total market value in Singapore plunged $40 billion, or 15.5 per cent.

The effect of the attacks was amplified by the fact that the world economy was then on the brink of a recession anyway.

However, the market's recovery was swift. By mid-October, the STI had rallied about 200 points and closed the year above 1,600.

3,875.77 (Oct 11, 2007) - after more than trebling in 4-1/2 years

SINGAPORE stocks were given a one-two knockout punch by the Severe Acute Respiratory Syndrome (Sars) and the Iraq war in the first half of 2003.

The Iraq war was hurting consumer and investor confidence worldwide and Sars ensured that tourists and shoppers stayed away.

The two events combined to drive the STI down to 1,213.82 points on March 10 that year. Then came the index's super charge.

Sound fundamentals, a global trade boom, stable US interest rates and the rise of China and India have helped fuel the bull run seen in recent years.

That has seen the index more than treble - from about 1,200 in March 2003 to its record close of 3,875.77 on Oct 11 last year.

Its 16.6 per cent surge for the whole of last year marked its fifth straight year of gains.

AmFraser's Mr Jarhom said: 'The bull market's longevity this time could be due to the absence of the irrational target setting prevalent during previous super-bull markets, which reflects investors' rising maturity and rational behaviour.'

In between, there was also time for the China Aviation Oil (Singapore) scandal, which erupted in late 2004.

It stunned investors when it chalked up US$550 million in losses from oil options trading and had to seek protection from creditors.

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