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10/16/2008

Please tell Hsien Loong or Chok Tong

Some of you reading this may have access to either one of them and you have my permission to tell them of my views about the Stock Market. My position is that the mechanism and structure have many flaws and the Stock Market is unsustainable in the long run. It will die a slow death with many innocent investors losing their life savings. We should not wait till another minibond scenario before we wake up. It is in need of an urgent review. One main point is that our market is too small, too imperfect that it can be easily cornered by the big funds or houses and be played to the disadvantage of small investors. Short selling is one feature that is often used against the small investors causing big losses to them. Short selling also disadvantages the shareholders and the company by driving the share price down against its fair value. This has many consequences to the company in fund raising and to shareholders who may pledge such shares as collaterals. The smallness of our investor pool and their limited resources are severely stressed by a constant inflow of new listings and also new derivatives. Not forgetting cross listing of stocks from other bourses. To make things worst, many of the stocks listed have proven to be raw deals resulting in many investors losing their pants. Then there is the uneven playing field between small and big investors, trading houses and big funds in the commissions charged. This literally translated into different odds favouring the big boys. Even casinos do not have different odds for big or small gamblers. The above are brief outlines of the flaws in the present system. I could further elaborate on them if necessary. If these are not put right immediately, innocent investors will continue to lose money relentlessly in the stock market. It will lead to the stifling and eventual termination of all trading activities when the small investors lose all their money, and also lose faith in the market. When that day comes, even the foreign funds will pack up and go as there will be no players in the market for them to exploit. Companies too will find it pointless to list here as the value of their stocks will become worthless. They cannot use them as collaterals or to raise fund in the market. There will be no IPOs, or if any, probably will be fly by night companies coming in for a hit and run. This is the dire strait of our stock market. And everyone seems to be in a state of eternal bliss. Yes we have a lot of good rules and regulations governing trading in the market. The compliance people and regulators are efficient. But the flaws are systemic. Do something quick.

14 comments:

Anonymous said...

Dear redbean;

may I suggest that You have your views and thoughts comprehensively compiled and then mail them to PM Lee Hsien Loong, SM Goh Chok Tong. Do add MM Lee Kuan Yew, the Heads of Ministry of Trades and Industries, Monetary Authority of Singapore, SGX and SIAS etc to the mailing list.

Your concerns for the local general investors are valid and laudable. The dangers You highlighted are highly probable.

I believe some highly qualified financial expert commenters may come in to contribute their ideas and opinions.

Wish You success in putting your message to the Right People.

patriot

Anonymous said...

Would they care? The economy is their sole concern and they have been striving very hard to be the financial hub for this region. So long as they are going to achieve this objective, Singaporeans can loose their underpants as well for all they care.

Mockingbird said...

The fact of the matter is: Risk-averse small time retail investors should not invest directly in the stock market. Because chances are: They can't afford to lose all their hard-earned savings which had taken them decades to accumulate. Better for them put their savings in investments which pay fixed income or fixed deposits. Interest may be pathetic, but at least there's no risk of seeing their hard-earned savings wiped out in a market meltdown.

Mockingbird said...

Valutations appear to be attractive. But i believe the stock market has yet to bottom out yet. May 2009 could be a good time to re-enter the market.

redbean said...

we need to just talk about it to see if people are interested to want to know of the inherent problems. if not, don't waste time.

as for small investors, it is alright to set aside some money that one can afford to lose to speculate in the market. in a free and fair market, it is fair game for everyone. in the case of a meltdown, everyone should take it in their stride.

the problem is that the system must be equitable and the odds must be even. there is no bankers with a better odds in a stock market. but the mechanism gives unfair advantage to some players and this is not acceptable.

Matilah_Singapura said...

I hope the authorities disregard your letter entirely. And here are the reasons:

* No market should be manipulated by regulation to protect either big or small investors.

* Regulations decrease market efficiency. The "free" market is the most efficient way to allocate resources. Market prices are signals as to what is going on. If you interfere with that mechanism, you slow everything down.

* A totally unregulated (by the state) market -- i.e. regulations self-imposed by the exchange itself not by the govt -- is the most favourable for a positive long term solution. If you have very good self-regulation and little or no govt regulation, you soon get a reputation for being efficient, honest and competent. Private regulation is the best way to curb dishonest behaviour, because you don't need state approval to exercise justice, since market participants have to agree to the rules before they are allowed to trade.

The SGX is PRIVATELY owned.

The best way the govt can help is to get the fuck out of the way.

i.e. "No thank you, we don't need your help" (redbean also holds this view wrt the people. but for the stockmarket he want govt control... go figure)

Anonymous said...

But redbean does have a point - that the market can be easily manipulated by big players (at the expense of the small papa-mam variety).

Anonymous said...

Don't think they are not aware. GCT is finance savy enough.

redbean said...

sure they know. the question is whether they would want to relook at their assumptions, model and the ambitious goal, and to scale down their expectations by modifying the mechanism given the experience they have learned.

or would they want to be stubborn and stick to a losing and fail formula.

Anonymous said...

have you tried applying for a job in MAS or the likes? i am sure a talented bright spark like you is welcome everywhere.

redbean said...

hahaha, anonymous.

there are plenty of bright sparks here too.

redbean said...

there are several forumers in CNA forum talking about the evil of short selling and the crimes against the small investors.

it is criminal to allow short selling in the stockmarket and facilating it with borrowed scripts.

Anonymous said...

Redbean, your effort is commendable. But I doubt they will care, since THEY ARE the big player through their proxy companies.

Singapore is unhealthy in the sense that there are too much conflict of interest in the hands of the policy-makers and the blatant ignorance and cowardice of the people.

Matilah_Singapura said...

No one can "manipulate" the market if it is totally free.

I repeat: the SGX is privately owned, and so it should be left alone — to that stocks can reflect their TRUE market price.

By imposing regulations on the SGX, you will give a "free kick" to the GLC's and other "private" companies created by govt. These stocks make up a huge chunk of the tradeable securities on the S'pore bourse.

Why would anyone in his right mind (unless he works with or benefits from the govt) want to PROTECT the GLC's?

Fuck em. Let them fall. Let investors dump the stocks and short them mercilessly. The govt should not be in the market in the first place. These motherfucking "elites" think that they can play "masak-masak" in the market? Now is the chance to hammer them LEGALLY.