The stock market is considered one of the most volatile business and investment models by many. The Straits Times Index indicates that there has been a 3.5 % rise in the Singapore stock market. There has been a stock market rally since the beginning of April, and it is possible that investors are wondering if they should invest in Singapore stocks and whether they are still as attractive as they once were. If you are wondering whether to go with these stocks or not, here are two ways to determine whether they are a worthy investment or not.
The PE Evaluation System
It is challenging to get past the daily PE ratios of the Straits Times Index. However, you can get the figures you need from the system by looking at the PE ratios of the SPDR STI ETF. These calculations are a proxy to help you get the needed figures. The SPDR STU ETF is an exchange-traded fund which follows the basics of the Straits Times Index.
According to this proxy, the EFT had a P.E ratio of 12.9. Some other important figures to note about this analysis are as follows:
- STI has had an average long-term PE ratio of 16.9. This is an average PE ratio of the years between 1973 and 2010.
- The highest point that the STIs ratio has ever been was in 1973 when it hit 35.
- The lowest point the STI ratio has ever reached was 6 in 2009.
If the figures above are anything to go by, it is safe to infer that Singapore’s stock is cheaper than its average cost at the moment.
The Net-net Stocks System
The second way in which we can evaluate the SGX Nifty and other STI stock is the net-net stock method. This method looks at the availability of stocks in the local market. The theory stipulates that if there are a large average number of available stocks in the market, it is an indication they are cheap at the moment.
Normally, when the Straits Times Index is at the peak, the net-net stock is usually low. On the other hand, when the Strait Times Index is at a low point, the net stock in the market is unusually high. For instance, in 2007, one of the years when the STI index peaked, there was a net of 50 stocks in the market. On the other hand, in 2009, when the STI index went into a record low, the net stock in the market was at 200.
With the analysis methods above, we can conclude that currently, shares are not very expensive in Singapore. However, this also does not mean that they have entered the bargain category.
Factors that influence the STI Index
The factors that influence the rise and fall of the stock market are generally similar across the globe. However, other specific factors affect unique stock markets such as the Singapore Market. Some of these factors include:
- The goodwill of the companies involved: Goodwill is one of the most important factors that determine the stock value. Goodwill includes the corporate identity of the company and also the corporate image. SGX Nifty’s old customers have been a positive influence on the company’s corporate identity, which has kept their stocks afloat.
- Company sentiments: The stock market is usually affected a lot by the sentiments being passed around in the market. The ability of company administrators to hold secrets which could negatively affect stock pricing is crucial for the stability of the stocks in the market.
- Unexpected Circumstances: There are countless unforeseen circumstances which can crop up and hurt a company’s stock price at any time. Natural disasters and worldwide market crashes are just a few of these factors.
Other factors that affect stock values are analysts’ reports. These can be company intrinsic reports or independent reports. If the reports indicate that the company is ailing, the stock price index dips. On the other hand, if the report indicates that the company is healthy, the index goes up. As an investor in the STI and other stock markets, you should watch the social and economic environment in Singapore carefully before making an investment decision. This will help you maximize your earnings.