Singapore Before Singapore.Stamford Raffles founded Singapore as a trading post of the British East India Company in 1819. The city became part of the Straits Settlements in 1826 and its capital in 1836. The British were defeated in the Battle of Singapore on February 15, 1942 when 60,000 British troops surrendered to the Japanese in one of the worst defeats of British forces in history. The Japanese surrendered on August 15, 1945, but the failure of the British to protect Singapore from the Japanese lowered Britain’s standing in the eyes of Singaporeans. Malaysia and Singapore were granted self-government in 1959, but because of economic and political differences, Singapore seceded from Malaysia and became an independent republic on August 9, 1965. The Malayan Stock Exchange was set up on May 9, 1960. Floors for trading shares were set up in both Kuala Lumpur and in Singapore. After Singapore seceded, the structure of the stock exchange remained the same, but its name was changed to the Stock Exchange of Malaysia and Singapore. When currency interchangeability was terminated between Malaysia and Singapore in 1973, the Stock Exchange of Singapore separated from the Kuala Lumpur Stock Exchange. As this brief history shows, there was no trading of Singapore stocks in Singapore before 1960. Singapore stocks were traded in London or not at all. GFD has been able to collect data on a handful of Singapore stocks in order to put together an index of Singapore shares before local trading began.
Singapore Shares Before IndependenceSingapore, as well as most of Malaysia, was a center for rubber production before World War II. The largest of these companies was the Straits Rubber Co., Ltd. which was registered in 1909, reorganized in 1919, and was acquired by Consolidated Plantations in 1972. Two other Singapore rubber companies registered in London were the Bukit Sembawang Estates and the Singapore United Rubber Plantations. These three companies made up the Singapore shares that traded in London before 1960. In essence, GFD’s Singapore stock index is an index of rubber companies. The market capitalization of these three companies remained small peaking at $2 million in 1920, and remaining below $1 million between 1921 and 1957. There is a gap in the index between 1957 and 1961 and after 1961, the Singapore Traction Co., Bajau Rubber and Produce Estate were added to shares of the Straits Rubber Co. to represent Singapore stocks in London. The price index of Singapore stocks from 1915 until 1957 is provided below in Figure 1.
The index had large increases when World War I began as the demand for rubber increased. When the war was over, the demand for rubber collapsed and the price of rubber stocks declined as well. A graph of the price of rubber between 1910 and 1960 is provided below in Figure 2. Both rubber price spikes in 1925 and in 1950 are reflected in the index with shares rising in price, and declining thereafter. Who in today’s modern Singapore of crazy, rich Asians would have realized the intimate relationship between the price of rubber and the performance of the stock market before the city gained its independence?
From a price point of view, investors lost money during the 50 years the GFD index covers. The only return was from dividends which could be reinvested in the company. The log graph below shows the impact of reinvesting dividends on the total return. Clearly, with reinvested dividends the return is positive.