Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/166064
Title: SEGMENTATION ON THE STOCK EXCHANGE OF SINGAPORE AND THE IMPACT ON STOCK CHARACTERISTICS
Authors: PAK HOE SOON
Issue Date: 1990
Citation: PAK HOE SOON (1990). SEGMENTATION ON THE STOCK EXCHANGE OF SINGAPORE AND THE IMPACT ON STOCK CHARACTERISTICS. ScholarBank@NUS Repository.
Abstract: Restriction on foreign shareholding of domestic companies is one of the commonest forms of barriers to international investments. In Singapore, such restrictions are imposed by certain companies operating in strategic industries. The objective of these restrictions is to maintain local controlling interests. Using the theory of cointegration, we find that the prices of the local and the foreign shares of these companies have no inherent tendency to move together over time when the foreign ownership constraint is binding. This provides us with evidence to show that the market for the shares of these companies becomes segmented between the foreign and the local investors when the restriction is binding. Based on our exploratory study, we notice some fundamental changes in the characteristics of the stock when the market becomes segmented. One interesting finding relates to the reduction in the responsiveness of the local and the foreign shares to market movements although the decrease for the latter is found to be insignificant. The two counters after segmentation are also found to exhibit less liquidity. Comparing the characteristics of the local and the foreign shares, our results show that in terms of systematic movement with the market, there is no difference between the two counters. Overall volatility or the total risk, however, seems to be greater for the foreign shares. Examination of liquidity difference yields inconclusive results. This study is aimed not only at the academician, but also the investor and the firm. Given recent developments in the equity markets in Singapore and Malaysia, this study has assumes a greater importance. The possible hastening of the privatisation efforts of the Singapore Government together with strong foreign interest in the regional markets would tend to make this study a valuable resource for the security industry.
URI: https://scholarbank.nus.edu.sg/handle/10635/166064
Appears in Collections:Bachelor's Theses

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