Despite its reputation as a financial hub, the city-state faces spotty stock market liquidity. Trading activity on the Singapore Exchange (SGX:S68
) (SGX) has been uneven. While large caps such as banks enjoyed healthy investors’ interest over the past year or so, smaller and mid-cap stocks stayed under the radar. Limited liquidity has deterred investors from engaging actively, causing many listed companies to trade at discounted valuations compared to their regional peers or even to delist and exit the exchange.
Liquidity is essential for a healthy financial market, lubricating efficient trading and ensuring market stability. It represents the ease with which assets can be bought or sold without significantly affecting their prices. High liquidity reduces transaction costs, fosters tighter bid-ask spreads, and enables market participants to enter and exit positions with minimal price impact.
A liquid market facilitates greater investor confidence by reducing the risks of holding and trading securities. When investors know they can sell their holdings without difficulty, they are more inclined to participate in the market.
