STI fantastic performance

As our Singapore market is rallying, I can’t help but to wonder why Singapore market is so resilient when many of the world market are actually showing downtrend.

Let’s have a look at the different significant world indices’ charts:

Dow Jones Industrial (US)

FTSE 100 (UK)

Hang Seng Index (Hong Kong)

Nikkei 225 (Japan)

Shanghai Stock Exchange (China)

Straits Times Index (Singapore)

I have also managed to combine these 6 indices with equal weightage to form as 1 chart so as to form a base for comparison.

Combined 6 indicies

To have a fair comparison on market’s performance, I shall use the last 5 year’s bottom and recent 1 year’s low as a base.

Last 5 year’s bottom (9/3/2009)

Observations:

Based on the base of 9th Mar 2009 to now (7th July 2010), STI is the best performer among the major indices, Hong Kong is performing close to STI and the worst is SSE.

Comparing to the base index for the whole period, DJI seems to be trading closer to the base index.

Another observation is that most of the market except SSE is trending similarly to each other. Hence, this shows the general correlation-ship of major markets.

Conclusion:

It is very obvious that STI is outperforming other major markets in the world. But why is it so? What makes the investors around the world to bullish about Singapore market?
The only few possible reason I could think of are the economic fundamental reasons. Although Singapore is a small country, its economic progression is mainly supported by import and export trades. As it has been known in the world that China is the world’s producer and US is the world’s consumer, there is a need for a “medium” for 2 countries to trade. Hence, probably, import and export countries could benefit from such phenomenon that is happening currently. Therefore, by looking at the country’s economic strength, Singapore and Hong Kong will best fit the requirement to be a medium for both countries.
So from the charts, it is no doubt that both Singapore and Hong Kong are the top performers among the rest of the indices.

Hence going forward, it could be important to look at the economic situation of both US and China, any slowdown in consumption (US) or production (China) might have a direct impact on the economic situation of Singapore and Hong Kong. Which might in turn affect both market’s strength.