THE role the Straits Times Index (STI) plays in daily market life cannot be understated - large movements in the index can exert profound influence on sentiment, especially in today's environment where super-fast computers can greatly exaggerate price movements.
Also, with liquidity gradually declining as it has over the past three months to less than half the levels of January-February, trading of the index has assumed greater significance. For the past week, the average value of trades in STI stocks was $607 million, 67 per cent of the entire market's average of $910 million. Since there are about 780 listed counters, this means that less than 4 per cent of stocks contribute two-thirds of daily turnover (or, if you prefer, 96 per cent of stocks only add up to one-third of daily business).
As a service to the retail investor, it therefore makes sense for the Singapore Exchange (SGX) and index guardian Singapore Press Holdings (SPH) to collate the latest research by the stockbroking community on all 30 index components and post this information on SGX's website in a separate, prominent and easily accessible location on the home page.
Consider, for example, the Jardine group whose daily gyrations regularly shift the index by large amounts. Although Jardine has traditionally been viewed as an institutional stock because of the complex nature of its organisational structure and the high absolute price of its shares (Jardine Matheson trades around US$50, Cycle & Carriage at US$40 and Jardine Strategic at US$30), there is every reason to believe that as retail investors' sophistication rises over time, so too will interest in Jardine. Yet there is very little publicly-available investment coverage on the group - a visit to the exchange's website, for instance, yields nothing in the past or present.
SGX and SPH could either gather the research itself from the brokers who cover these stocks or request it from the companies themselves. The research doesn't have to be that up-to-date - as in posted on the day it is published - since institutional clients of research houses pay for exclusivity.
But reports that are, say, a few days or even a few weeks old should be acceptable since they would still be of use to the investing public and their availability would go a long way towards keeping retail investors updated on the investment community's views of the 30 arguably most important stocks in the market.
While on the subject of SGX's website carrying reasonably timely research, it might be an idea if the exchange were to go through the research database that pops up when clicking on the "Research" icon and delete the numerous long-outdated reports that appear, such as those that date from as far back as 2007 since these would have virtually no usefulness or relevance today.
At the same time, it would also be advisable to remove reports by houses which are no longer actively performing stockbroking research.
It's possible to take this one step further - SPH and those entrusted with construction and maintenance of the STI should require research coverage and ready availability of reports as equally important criteria for index membership on top of size and liquidity.
After all, if a company is not widely followed by the financial community or if the public would like to know what brokers think of a stock but are unable to find the necessary information, then it's debatable whether it can be said to properly represent where the market's interest lies.
Who knows, adding research coverage as an index requirement and making reports easily accessible to everyone might just help in attracting the largely missing retail investor back into the equity market. With liquidity as bad as it is now, it's certainly worth a try.HOCK LOCK SIEW
By R SIVANITHY