Heat Map of Global Stock Market Valuations
A while back, a friend of mine shared an interesting website that displays useful information for the global stock market.
You can access the website via this link here. Credits goes to the team at StarCapital.
It caused me to wonder what caused such a wide valuations difference between different markets?
There are a few factors which I see:
- Maturity of the stock market
- Friendly laws and good corporate governance framework
- State of the economy
Using the analogy of a private company going for public listing, theoretically, the process of listing would give a re-rating in terms of Price-to-Earnings ratio because the liquidity risk is reduced. Investors are willing to pay more for a company that went through extensive scrutiny as part of the listing process. It is deemed as a ‘checked’ company compared to a private company, ceteris paribus.
I find that the reason why Singapore-listed company could not command a higher valuation because of our under-penetrated retail market for investors. To an extent, it reduces the ease of trading for investors. Ease refers to the ability to get your orders filled easily. Another possibility lies with the fact that in Singapore, we have a growth ceiling and smaller domestic market to serve. Unless the listed companies have international operations, their long-term growth potential is capped somewhat. However, this doesn’t not mean that you cannot generate good capital returns by investing in a SGX-listed company.
In an article by Singapore Business Review dated 2012, it stated that our “penetration rate is 9% in comparison to Hong Kong’s 35% and Australia’s 43%”.
The situation improved in 2015 when Singapore launched Singapore Savings Bond with more sign-ups than usual. SGX shared here that, on average, about up to 6,500 new accounts are opened monthly. The lot size was also reduced from 1,000 shares to 100 shares which might have encouraged more sign-ups.
This year, an article reported that Singapore has 1.7 million CDP individual accounts. Against our population size of 5.6 million, the penetration rate improved from 9% to 30%. This is a remarkable feat, however, I will be keen to find out how many are active accounts.
Here are some market statistics from Singapore Exchange:
September (link), October (link), November (link)
Apart from November, the previous two months suffered from lower market turnover. There are, in fact, a handful of stocks which are thinly traded. It seems that the newer CDP accounts did not contribute to a higher market value turnover.
I find it necessary for any new investor to start their investing journey in their local markets to familiarise themselves. Subsequently, it is important to open up your horizons and look beyond your shore. After 2 years investing in Singapore companies, I have starting to look at overseas market such as ASX and SEHK.
Cheers!