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5/26/2006

cha hern keng's passion on managing the stock market

I share Chia Hern Keng's passion in pushing for Asian govt to work out some system of intervention in the stock market before another crisis hit us. His reasons are very similar to mine, the ability of huge mutual funds to wreck havoc in any small Asian markets. He contributed another article on this today in Today paper. It seems that lethargy has set in after the last financial crisis. During those dark hours, all kinds of plans were suggested but subsequently put aside when the dust settled. All the dust will settle after every disaster. And all the carnage will be removed and forgotten. Since then, the slow and painful recovery has taken shape while everyone either have gone to sleep or have short memories of those frightening times. And the fruit is just about ripe for another bout of attacks. It is sad and disgusting to know that the more advanced Asian countries who should be taking the lead have lapsed into a stage of self delusion. It would not happen again. Unexpectedly India has rose to the occasion to close down its Bombay stock market for a day under a panic sell down situation. And when it reopened, it gained 4%. And the Indian govt did not stop at that. Investors were assured, and banks were told not to pull the plug with making margin calls and selling off clients positions. In fact banks were told to provide the liquidity needed in such a crisis. And of course, the govt also rounded up the mutual funds to sort out the problems that these funds could create. As Chia Hern Keng said, billions of dollars could move in and out of a market with a few pushes of the button, not forgetting programme selling and buying. 'What would be questionable is a govt's inept response to such a crisis. If a govt just sit back and says all the upheaval and panic going around is just the work of market forces and the result of other countries' economic mismanagement, it is like an army general spouting philosophy when his country is being ravaged.' Chia said. The govts set up stock markets as a business concern for businesses to raise funds, for investors to invest in stocks all for good intention. What the govt did not ask for, and neither did the investors and companies listed in the exchange ask for it, is for mutual funds to push their stocks either way, recklessly beyond logic and fundamentals. And these actions would, if left unchecked, drive a herd down the cliff without them knowing why. The mutual funds are only concerned with their profits, with no responsibility to the destruction of investors or a stock market. And it is sinfully irresponsible for a govt to wipe its hands clean and say it is part of the game and nothing they can do about it. I would like Chia Hern Keng to continue his crusade in this forum if the paper is not giving him enough space and recognition of the severity of the problem.

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