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I'm so excited. Pop the Champagne.

The Straits Times
Published on Jan 01, 2013
STI records best annual gain since 2009

Bourse up 19.7%, but volumes reflect lack of broad market participation

By jonathan kwok

THE "fiscal cliff" jitters meant local shares ended 2012 on a sour note but the dip failed to take the gloss off what has been a fairly remarkable year for the market.

Despite yesterday's 24.72- point decline, the benchmark Straits Times Index (STI) still added 520.73 points for the year to close at 3,167.08 - up 19.7 per cent.

That is the STI's best annual gain since 2009, when it rebounded almost 65 per cent after a sharp recovery from the global financial crisis.

Go a bit further back and it looks an even more impressive performance: In the past 10 years, shares have bettered that 19.7 per cent gain only in 2003, 2006 and 2009.

Tokyo and Hong Kong did even better with both bourses up 22.9 per cent in 2012.

It was all the more remarkable as analysts and brokers were tipping a tough 2012 this time last year amid the long-drawn crisis over European debt and the weak United States economy.

"The August 2011 sell-down was quite a large one," said Singapore remisier Desmond Leong.

"Everyone thought: Could this be the next bear market? (Hence) December that year was a lot more choppy."

There has been some progress towards fixing global problems over the past 12 months, particularly in the US where economic data improved markedly towards the end of the year.

But market watchers say that the flood of liquidity unleashed by major central banks has played a larger role in the market's climb.

The European Central Bank, US Federal Reserve and Bank of Japan all expanded their various money-printing programmes last year.

China's government helped in its own way, by announcing one trillion yuan (S$196 billion) of new infrastructure spending.

Trading volumes here also indicate that the rally lacks broad market participation.

The year's average daily turnover was only $1.28 billion, down from 2011's $1.46 billion, although the average number of units traded daily was larger - 2.09 billion, as opposed to 1.41 billion the previous year.

This showed that remisiers were increasingly focusing on low-cost punts as they trade on their own accounts in the hope of earning some money.

They can trade in millions of shares each time but the combined value will be low if they are dealing in penny stocks.

"Ever since the casinos were set up, we've seen a steady decline of business (from retail clients)," said Mr Leong. "2012's business was not as good as 2011's, and 2011's was not as good as the year before."

Nomura Equity Research is tipping "single-digit returns" for the local market this year.

It said the ongoing economic restructuring could hit company earnings.

It even flagged the possibility of a market fall if the local economy turns out worse than expected.
I felt one of the contributing factors is the liquidity around as a result of QE here and there. 2013 to be another positive year?