12/10/2012

Can a financial centre afford not to have a healthy stock market?


All big financial centres will have a full complement of financial institutions and a stock market. In fact a thriving stock market is the cornerstone of a vibrant financial centre. The absence of a stock market, or a fictitious stock market that is dysfunctional just would not do and will lead to the demise of the whole finance and banking industry.

Could there be govts that are growth biased but blindly allowing their stock markets to wind down into a farce, or crippled through neglect or unwise systems or structures? A stock market has to function like a stock market and anything that is only a make belief and unreal cannot do. The industries, the companies, need a vibrant and healthy stock market with all the fund managers, big and small investors, brokerages, banks etc etc participating actively so that fund raising can be conducted efficiently to lubricate the economy. There is no such thing as a fictitious stock market, a sick stock market, a make belief stock market that is dysfunctional and thinking that the whole financial system will not be affected. It just would not work.

Can anyone imagine a stock market where trading is done by a few computers or a handful of funds, or a handful of investors? I know that it is a foolish thought. You either have a stock market or you don’t. Doing away with the brokerages, doing away with investors, big or small, are simply nonsensical unless the intent is to close down the stock market and lead to a highly strung banking industry that is going no where.

The stock market is really the core of the finance and banking industry. Only small and undeveloped countries do not operate a stock market. And companies will have difficulties raising funds from the public for growth and expansion, and have to rely on individual investors in small circles of contacts. The room for economic growth is thus limited.

Can a financial centre like Singapore afford to have a fictitious stock market or a dysfunctional one? Hither is the stock market? Is the stock market thriving or is it dying?

There are many ways to kill a stock market.

1. When companies find it meaningless to list in the stock market.
2. When there is no critical mass of investors, retail or institutions, to provide the liquidity.
3. Believing that a small market, without contra trading, can thrive as a financial centre.
4. Believing in fictitious trades generated by computers with no real tradings done to replace real trades.
5. Believing that with low or minimal commissions, the brokerages can continue to exist.
6. Believing that a stock market can exist without brokerages and their clients.
7. Believing and allowing unfair trading practices by computers and big funds to take advantage of small traders/investors.
8. Believing that a few computers can generate enough trades to keep a stock market viable.
9. Believing in derivatives trades to replace real stocks.

The signs that a stock market is rotting from within is for main board companies to be trading as penny stocks at 10c. Oops, some are trading at less than that, at 1c. When the true value of a company is more than the listed share value, the company will be scrambling to delist in fear of a hostile takeover in the cheap. When the true value of a main board company is really 1c or worthless, there is no fear of anything, no takeover, and continued listing could still allow the company to raise fund from the gullible public.

How healthy is the stock market? Is it in the pink of health, or just a mirage?

17 comments:

Veritas said...

The only way that can restrain HFT is Tobin Tax. As Singapore aspire to be a place where the the rich park their $$$ and invest, such is not possible.

In fact I am not aware any developed country in the implemented Tobin Tax. The financial lobby are far to powerful, same as in 1929. It took Great Depression and WW2 for FD Roosevelt to push through his reform and curb the abuses of elites.

Many people are not aware that it was the bankster who crash world economy in 1929, and give birth to Adolf Hitler.

I think this time, we may need yet another big disaster before the rich finally wakes up and realize that robbing the poor hurts them as well.

oldhorse42 said...

How healthy is the stock market when it could attract only dodgy companies from China wheras HK attracted the creme?
Any one unwittingly put monies in these companies lost their pants. Yet the directors of these companies could not be held accountable. They are happily living in lxury back in their home country with our monies!

Anonymous said...

rb
This is just PAP propaganda; "that Singapore is a financial centre."

The unhealthy stock market is proof that Singapore is not a financial centre. And our financial "top talents" are overpaid.

Anonymous said...

This year MAS came out with a ruling that all investors must take exam before they are allowed to buy foreign stock. Look at all the china stocks which SGX brought in which have been delisted, I think MAS should have SGX personels to take exam before they can bring in Foreign share listed in Singapore. How about That as they need it more, lah.
TwoGreenBeans

Anonymous said...

Asking SGX personnel to take exam would make them answerable.
Asking investors to take exams would make investors responsible.

I say let's do both.
Then we stop finger pointing right away.

Anonymous said...

More important is not to allow computers of funds to link to the trading system to tap on buy and sell positions. Computers must not be allowed to trade against humans. Unfair advantage!

Anonymous said...

Hi rb,

The answers are there for all to see.

Persistent low interest and dividend yields with zero capital gains tax and concessionary tax rates for traders, the stock market is skewed towards trading, churning, HLT and speculative deals. This is abetted by a conflicted, complacent, unthinking SGX.

What we see are red chips, zombie penny stocks, expensive derivatives, speculative coys, that continue to suck monies from the economy. Zombie coys that don't die and allowed to raise new monies to become zombies again. Coys that get hollowed out and taken private. Red chips that get away. Derivatives trades that are active that underlying trades. Invisible trades that are legal. Scams are what these are.

It is amazing that this has been going on for sometime. Like scams in general. Like some stock markets.

faber

Anonymous said...


With the SGX in its debilitating state why is the foreign talent CEO and its many senior directors, presidents or vice-presidents still pay themselves million dollar salaries every year? They are not fair to local investors for paying themselves well with sinful salaries while not performing to expectations.
Anyway the stock markets in USA and all over the world have been turned into high stake gambling dens or casinos by the most immoral and most unthical American robber barons, crooks and scoundrels and therefore if the government has any conscience it should close down SGX to prevent further bleeding of Singapore and its local investors financially.

Eagles Eye

Anonymous said...

The Stock Exchange can go kaput lah, not an issue lah.
We have Number Seaport and Airport where real trades take place 24/7 and never stop.
Real trade not paper trade.

Those doing paper trades will not complain liked some here lah.

Matilah_Singapura said...

>> How healthy is the stock market? Is it in the pink of health, or just a mirage? <

The SGX is going A-OK. Because it is PRIVATELY OWNED (publicly listed), management will do whatever it takes to keep it a profitable business.

Singapore is still a very much sort after "go-to" place to float business ventures.

It is efficient and modern...doing away with many of the expensive overheads based on human labour and replacing those practices with systems and machines.

Don't worry folks, the sky ain't falling...yet. There's still plenty of opportunity to profit from smokin' "free wheeling anything goes" Capitalism, Asian Style. (do the Gangnam Dance now)

Chua Chin Leng aka redbean said...

Just remember what George Yeo said.

Everything looks so perfect from the outside. It is not real.

Matilah_Singapura said...

...and who the fuck is George Yeo?

One man.

One asshole.

One opinion.

Chua Chin Leng aka redbean said...

He is definitely more talented than you.

Anonymous said...

Dont think George Yeo is anywhere as
intelligent as Matilah Singapura.

George is definitely more pious than an atheist like Matilah.

Atheist like Matilah Singapura is definitely more honourable than pious folks who took to vice to grow wealth. At least Matilah never encourage gambling here and paid for all his sex romps as he constantly declares here. That is reason why he gets stalk all the time too.

patriot said...

Like to say something good about the Ex Foreign Minister.
To me Georgie is honest and straight to the point of been insolent, he behaved very 'tua/大' when he was a minister.
His colleague, the Smiling Cow on the other hand is sly and sweet.
But, beware of look, it can be very misleading.

patriot

Matilah_Singapura said...

Please, please... Some of you give me way too much credit.

The only talent I have is lying flat on my back, and having 2 girls pleasure me, and each other with their mouths and heavenly scented female secretions.

Lucky we have talented people like Georgie boy Yeo to make sure that the world runs like clockwork, and critical things get done... so that the untalented fuckers like me needn't worry as I spend my blissful time getting my asshole licked and my balls slurped whilst being high as a kite on Absinthe.

Anonymous said...

Holy Cow.

Lolx!