The financial markets are crucial to the economic stability of a country because of the trading volume and direct impact on various industries and sectors of the economy. Online trading has revolutionized the financial sector, enhancing access and investment processes. In Singapore, online trading impacts the economy in several important ways.
Online Trading: Singapore as a Financial Destination
Singapore is a global digital technology hub for financial services, science, and business. The country heavily depends on trade and has a trade-to-GDP ratio of over 300%. Singapore prioritizes digital transformation and has, over the years, built a conducive environment for Singapore forex broker firms and other companies to function.
Singapore, the Southeast Asian country, has a thriving online trading ecosystem that facilitates local and international investments and payments and attracts talent worldwide. A February 2023 report from leading financial services industry research firm Investment Trends showed that 264,000 Singaporeans traded Stocks/ETFs over the previous 12 months.
This country also has an impressive forex market. The Singapore dollar accounts for 1.8% of the global daily currency trading volume, and the overall daily turnover in Singapore reached US$864 billion. The Singapore dollar is now the twelfth most-traded currency and one of the strongest currencies in Asia.
The Impact of Online Trading on Singapore’s Economy
Online trading impacts Singapore’s economy in various ways, from increased job demand in the FinTech sector to expanding the country’s digital economy and stock market.
Job Creation in the FinTech Sector
The increase in online trading activities correlates with increased products, services, and solutions in the FinTech sector. Companies offering solutions for e-wallets, payment processors, cybersecurity solutions, financial brokerage, capital markets, insurtech (insurance technology), regtech (regulatory technology), accounting, taxations, compliance, and data analytics, etc., abound in Singapore. Some companies manufacture hardware for computers and other machinery used in the FinTech industry. These companies hire local talents and contribute to the local economy.
According to Mordor Intelligence, Singapore’s FinTech market is expected to grow at a compound annual growth rate (CAGR) of 10.24% between 2020 and 2029. The market size in 2024 is US$38.80 billion, and as the demand for FinTech jobs increases, it is estimated to grow to US$63.18 billion by 2029.
Increased Innovation
The demand for fintech products and services increases innovation in the sector. For instance, investors are more environment-conscious and increasingly adopt non-financial factors such as environmental, social, and governance (ESG) to promote sustainable investing. Firms providing brokerage and other financial services must evolve to meet changing market dynamics and maintain/enhance their integrity. These lead to rapid innovation and adoption of new technologies. Firms must invest in research and development to ensure innovation and to stay ahead of competitors. Singapore’s economy, therefore, benefits from the increase in research and the technologies they develop.
Positive Impact on the GDP
Singapore has gradually positioned itself as a FinTech hub and deployed digital technologies to enhance the GDP. The country relies on manufacturing and services, with nearly 70% of Singapore’s GDP generated by the services industry. The GVA data shows a marked increase in professional services, indicating a steady demand for products and services for various industries. This has led to the growth of the digital economy, which contributed over 17% of the gross domestic product in 2022. As a central transshipment hub, online trading facilitates cross-border payment and positively impacts the GDP.
Impact on Stock Market Performance
Word-of-mouth referrals have increased participation in Singapore’s financial market, marking a significant uptick in trading and investment activities. With more people becoming conscious and self-involved with online trading, the stock market enjoys more trading volume and inflows toward shares. CFD (contract for difference) trading, which allows trades to speculate on the price of an underlying asset, may influence traders to buy and hold the underlying shares from stock markets, thereby shaping demand and supply in the stock market.
Regulatory Environment
Singapore’s apex regulator and central bank, the Monetary Authority of Singapore (MAS), has continually evolved and taken on responsibilities in the financial markets. The MAS sets regulations, supervises the country’s banking and financial sector, and enforces policies and regulations through Directions. Singapore’s regulatory framework balances consumer protection with enhancing trade and business so that individuals and companies enjoy the flexibility of online trading from their mobile devices.
Impact on Lifestyle
Online trading allows investors to explore financial markets conveniently from their phones or laptops. This has allowed digital nomads to adopt the work-travel lifestyle, where they can trade financial markets while traveling the world. The increased adoption of remote work is shaping the economy by impacting consumer behavior, associated costs, work effectiveness, and adoption of products and services. They also have access to more information and can make cost-effective, more intelligent investment decisions.
Challenges and Opportunities
Singapore continues to grapple with several market challenges, such as economic restructuring, service barriers, an aging workforce, and increased competition from other trade agreements. These impact the economy and influence the demand for the local currency, presenting opportunities for traders to find profitable trading setups. The increase in online trading also presents opportunities for companies offering financial services to develop and provide practical solutions to a growing market.
