A Comprehensive Review of 2016: The Ups & Downs of the Singapore Stock Market

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Here’s what the STI looked like from 2014-2016. I’ve only put in one indicator, an exponential moving average, to show the general direction of the market. The huge move was somewhat like a freak rollercoaster ride, while the year 2016 has been a whirlwind of sideways price action.

aThe Straits Times Index, from 2014 to 2016; what a ride it has been!
Source: Chartnexus

The market isn’t exactly bullish, and it has been rather undecided in 2016. The huge fall that you see in the chart above was started by the sell-off in the Chinese market in Aug 2015:

dowNews headlines in Aug 2015 struck panic in investors worldwide.
Source: CNN Money

Ever since that crash, the STI has been struggling to find its footing over the next 16 months. It’s been interesting to look at how different people have predicted what would happen to the STI,

Tradingeconomics.com provides this image (below) as a prediction to the state of the STI. They are projected using an “autoregressive integrated moving average” (ARIMA) model, as mentioned in their website. This gives a range of values that the STI is likely to fluctuate within.

waveThe econometric model shows a bear market has started to develop.
Source: TradingEconomics.com

This is rather depressing considering that the Dow and S&P have hit new highs, with some even calling for “Dow 20,000”.

Another website forecasts a measured move fall in the STI. Referring to the diagram below, this means that the stock market will fall by the distance of the red arrow, producing two red arrows of the same length, just as it has done so for the bull run, producing two blue arrows.

redThis particular prediction for 2016 was accurate; the STI moved a lot lower than where it was in this chart.
Source: AmiBrokerAcademy.com

After falling by a measured move, the STI climbed slowly and went nowhere in 2016. The year was marked by uncertainty, binary events, political shuffles and record lows/highs on many financial instruments.

 

THE YEAR 2016 IN REVIEW: A SHAKY START IN JANUARY

January started quite poorly for the STI, falling 6.4% from Dec 31 to Jan 30, 2016. Total market capitalization was $804.9 billion, down from $856.4 billion on Dec 31, and investors were worried about the January barometer coming to pass.

3 companies were listed on the Catalist board of the Singapore Exchange, but it did little to bring the market cap higher.

Strong blue-chip companies like Prudential, DBS, and Keppel, were down -14.1%, -15.8%, and -22.9% respectively for the month of January.

In the chart below, the last candlestick is the 1st of February. That was how the charts looked at that point in time!

downThings weren’t looking that good at the start of 2016.
Source: Chartnexus

A ROUGH MID-YEAR: VOLATILITY IN APRIL

April was characterized by wide swings in either direction, and intraday volatility for all 30 STI stocks was at 36%.

Three stocks were in focus at that point in time: they had an annualized intraday volatility of 68%, compared with the average of 36%. They were Noble Group, Golden-Agri Resources, and Thai Beverage PCL. 

Subsequently, Noble went on to experience a shocking -55.8% free-fall in the next 4 months, Golden-Agri fell -15.4% before recovering back to its original price at end-April, while ThaiBev experienced a shocking +42% bull run in the next few months.

thaiThaiBev experienced a spectacular bull-run after our stock screener picked out hidden buying in April. 
Source: Chartnexus

 

JULY 14th – 5.5 HOUR TRADING HALT ON SGX

On 14th July 2016, the SGX experienced it’s longest trading disruption ever. Trading was halted just before noon stayed shut for the rest of the day. Apparently, trade confirmation messages were duplicated and posed a serious systematic risk to the SGX.

In an update to reporters, confirmed that executions were back to normal and said the market come back up by 4pm, however, it retracted its previous statement and said the market would be closed for the rest of the day, and it wasn’t clear then whether the market would open. The green arrow in the picture below shows the day that this happened.

jump
tadinghalt
The trading halt was a mere blip on the chart; the market ended +0.7% after the problem was resolved.
Source: Chartnexus, Straits Times

The markets seem unaffected, and subsequently went into a 3-month yo-yo about the trading range during that time. It was particularly difficult to trade because there wasn’t a clear trend in sight.

Swing traders (those who hold a trade to ride a trend) were particularly hit by this period. Their trades would have been stopped out easily, and new entries were psychologically difficult to take. The confusion kept these traders aside, and intra-day traders prospered during this period.

NOVEMBER 2016: BREAKOUT AND A NEW BULL RUN?

2016The STI broke out of a classic wedge pattern, and is currently testing the prior highs in July.
Source: Chartnexus (Chart correct as at 15 Dec 2016)

After a couple of months of going nowhere, the STI looks like it has made a resolution to go higher, but it has paused near the prior resistance level. It could find support at the EMA, but we’ll have to look for more price action to make a high-probability trade.

The STI is still positive for the year, and those who bought the STI had to sit out a rather uneventful 2016. The big wins came from stock speculators getting involved in superstar stocks like CityNeon (up >500% for the year), China Aviation (up >100% for the year).

2016 IN SUMMARY: A SIDEWAYS MARKET WITH MANY SURPRISES

In January 2016, a senior investment strategist at OCBC stated that the market volatility “will cause your stomach to churn, but it may not be enough to cause you to lose your job or wipe out your investment. (China) will cause volatility, but not enough to create mayhem”. The market at the start of the year was still reeling from the spectacular crash of the Shanghai stock market. This time, amidst a post-Brexit world, populist political climate, and a recent U.S Federal Reserve rate hike, it makes sense to think the year wouldn’t start with a bang.

There is a saying that “the market tends to be 6 months ahead of the economy”. If this were true, we should see economic indicators picking up, as it already had in the U.S with better employment figures. Let’s see how 2017 will begin!

Cheers! 😀

REFERENCES & RESEARCH SOURCES:

http://www.tradingeconomics.com/singapore/stock-market/forecast
http://www.straitstimes.com/business/companies-markets/good-chance-of-sti-rebound-in-2016-ocbc
amibrokeracademy.com/amibroker/straits-times-index-prediction-for-2016/
http://www.channelnewsasia.com/news/singapore/sgx-halts-trading-in/2956382.html
http://www.straitstimes.com/business/companies-markets/sgx-says-securities-market-to-open-per-normal-on-friday
http://www.straitstimes.com/business/companies-markets/sgxs-longest-trading-halt-raises-concern
http://www.straitstimes.com/business/companies-markets/value-of-singapore-stocks-down-64-in-jan
http://sbr.com.sg/stocks/news/here-are-three-most-volatile-sti-stocks-in-april

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