Citing bearish forecasts for the Singaporean economy, retail investors report an increasing skittishness. IROs must better communicate their expectations through digital channels to proactively ease retail investor concerns.
Like much of the world economy, Singaporean markets have weathered a rocky start to 2016. For retail investors in particular, confidence in the local stock market has fallen off steeply, giving credence to concerns that interest in aggressive or even measured risk-taking has subsided — or worse, that investors will take their capital to calmer waters.
The Straits Times reports that retail investor confidence has fallen 15 points since last June, as measured by JP Morgan’s Investor Confidence Index. This system was developed and is continually updated using the bank’s bi-annual JP Morgan Asset Management (JPMAM) survey, a trusted bellwether of global investor sentiment.
Although the government, in tandem with the Singapore Exchange (SGX), has launched simple, low-cost investment initiatives for retail investors, trust remains shaky. There is still a dire need for SGX-listed companies to promote transparency and proactive communication in order to regain the confidence of wary shareholders.
A Troubling Trend
At this time, retail investors are not optimistic about their future prospects. The Straits Times observes that a meager 36% of JPMAM respondents expect the Straits Times Index (STI), the SGX benchmark, to rise in the next six months, compared to 53% in June. And while 42% expected market conditions to improve at that time, just 28% believe that they will today.
Speaking with Channel NewsAsia Singapore, Head of Fund Sales at JP Morgan Brian Tan predicted that, “With weak oil and commodity prices, coupled with policy divergence [among global banking authorities] finally underway, we expect to see more volatility ahead.”
But despite this forecast, there are positive signs that investors will hold firm — 85% of retail investors plan to keep their funds in-market, choosing capital growth and stability over taking risky shots in fluctuating markets.
Granting Easier Retail Investor Access
At the same time, the Monetary Authority of Singapore (MAS) has already made it easier for individual retail investors to stake claims in the SGX, bolstering the economy’s share of financially knowledgeable and dedicated local stakeholders.
For example, last April, the MAS announced that they were granting retail investors increased access to a range of comparatively simple, low-cost funds, such as Exchange-Traded Funds (ETFs). SGX also waived clearing fees for such funds through the end of 2015 to stimulate both retail and institutional investors, according to Channel NewsAsia.
One barrier to entry for retail investors has been financial education. To combat this, the SGX has also announced its Save and Invest portfolio series, a simulated group of market-indexed funds designed to show individuals safe and effective investment choices, according to MAS. Given how easily novices to investment can find themselves being swindled or led astray, trust and transparency is especially important to stimulating new, local investment.
Digital Transparency Bolsters Confidence
Unlike institutional financiers, many retail investors lack the industry contact points and financial know-how needed to gauge the inner workings of markets. Their confidence in the SGX is therefore heavily tied to public perceptions of market strength.
However, this presents a unique opportunity for corporate entities to establish direct channels with their retail stakeholders and communicate their market expectations clearly. Given the rapid tide of technological adoption sweeping Singapore — it has the highest smartphone penetration worldwide, for example — IROs must provide new ways to engage with their retail investors.
The only way to reliably counteract dangerous hearsay amid volatile conditions is for SGX-listed companies to maintain constant contact with investors, especially if they expect to outperform the market. Only by increasing transparency and proactive communication can corporations breed trust and goodwill in a market flooded with doubt.
Mark Charland is the Managing Director of AppTick, and distributor of ShareholderApp in Singapore and 12 other markets across Asia.
(Main image credit: Unsplash)