Besides looking at STI Index daily, it also as important to review the daily stock trading volume both in terms of total number of shares traded and total dollar values traded.
For example the STI closed at 3,098.06 on 19 February up by 14.72 points from previous close on total volume of 2.01 billion shares worth $1.78 billion traded. Though the STI went up, but the volume traded was miniscule when compared to 18 July 2007 volume of staggering 9.22 billion shares worth $4.4 billion (an all-time daily record).
The average daily volumes for 2007 and January, February 2008 are:
First Quarter- 2.3 billion shares worth $2 billion
Second Quarter – 3.5 billion shares worth $2.2 billion
Third Quarter – 3.1 billion shares worth $2.6 billion
Fourth Quarter – 2.26 billion shares worth $2.4 billion
January 2008 – 1.95 billion shares worth $2.26 billion
February 2008 to date – 1.69 billion shares worth $1.8 billion
(Source: “Falling stock volumes reflect bearish market”, The Straits Times, 20 February 2008)
From the volume of shares traded, the stock market is in the grip of bearish sentiment. Investors are holding back trading whether it is buying or selling of shares. The uncertainty faced by the stock investors is clearly reflected in the thin daily trading volumes. The confidence level is low in equity investment now. The herd mentality is obvious among investors. There could be some really good shares that can be bought during this bearish environment and hold them for longer term.
If the STI moves down in the future, look at the daily volume traded at the same time. If the volume of shares traded is thin, then the drop in prices of shares is not reflective of the underlying values of these stocks in the longer term. Don’t panic and start selling your really great shares and benefits others in the process.
Written on 2/20/2008 8:42 PM
Copyright © 2008, the author known as LKT in Singapore.
The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.