3/02/2015

SGX – a victim of conflicting demands and interests


Sivanithy of Business Times has an article in the Mypaper today discussing about the conflicting interests of shareholders and stakeholders and between the pull of derivatives and equities. The shareholders want more profit and derivatives are the instruments to do just that while equities are no longer able to provide the meat for the profit hungry shareholders. Equities are old fashion and no longer serve their purpose to the profit oriented shareholders in the SGX. In that case would it be a simple solution, remove the non performing equity market and consolidate all resources to the derivatives market for best returns. I am sure the SGX shareholders would love that.
The question is, can the derivatives market exist on its own without the equity market? Possible if the derivatives contracts are written on iron ore, rubber and mickey mouse. There is no need for equities and there is no place for an equity market. Is that true?
 

Why is there a stock market for equities in the first place? What was the primary role of the stock market and is this role no longer relevant and no longer needed? In theory Sivanithy said, ‘the equity market I sof paramount importance as,…at least it provides the economy’s link with the future by allocating scarce resources to their possible uses. What is this paramount role and possible uses? Other than the collateral benefits of an equity industry and the supporting services, the stock market is a source of fund for the industries, to support the growth and expansion of industries. Is this no longer necessary?
 

What are the major contributions of derivatives to the economy other than as another form of gambling chits? The derivative market can exist on its own steam by selling gambling chits based on fictitious non existing commodities, good and services or products. It is a pure gambling business once the link to equities is delinked.
 

The SGX is like a forlorn girl undecided which guy to go with, one stable, solid and conservative but lack the vibrancy and extravagance, and the other all hyped and very lucrative, all glittering tinsels but no substance. Actually the dull and conservative equity market could also be glittering and exciting as it was before. Its attractiveness and usefulness have been hijacked by the advent of derivatives that rode on it but relegated it to the backdrop as old furniture.
 

Whose interests shall prevail? Can the SGX survive and be viable without the equity market or can both exist separately without the linkage that is damaging the primary role of equities and the reason for its existence? Can the SGX have its cake and eat it as well, without destroying the whole equity market and industry and thrives on the fictitious gambling chits called derivatives? Or should it be, can the SGX continue to exist if it does not serve its original purpose to begin with?
 

Why should companies list their shares in an equity market that is dysfunctional and be used as objects of little value to support the derivative market at their expense. Why should the companies pay high listing fees for nothing or even risk losing control and ownership when the value of shares reaches junk status? Why should the supporting investors keep throwing money into an equity market to see the value being eroded by derivatives and algo trading that have no interest in the fundamentals of a business and the intrinsic values of the stocks?
 

I think it is not so much as a conflict of interests between shareholders and stakeholders but an issue of greed with no responsibility on the consequences inflicted to a whole industry, the viability, sustainability and the main reason for the existence of a stock market.

21 comments:

Anonymous said...

Common sense tells us that if the market value of the derivatives market exceed the market value of the equities market the derivatives are based upon.

Anonymous said...

CORRECTION:
Common sense tells us that if the market value of the derivatives exceed the market value of the equities the derivatives are based upon ... then we have a speculative bubble.

jjgg said...

if 90% of the stock market capitalization is in 10 stocks..does it warrant the existence of sgx at all? Perhaps a Mickey mouse gallery will attract more participants

Anonymous said...

They are so happy to turn the SGX into a Mickey Mouse exchange for children to speculate with their angpow money and expect the
SGX to become a financial centre with stocks cheaper than a peanut.

The clowns are holding centre court and claiming this is the way to go. A karang guni stock exchange!

patriot said...

Does SGX matters much to the average man in the street?

patriot

Anonymous said...

It would be so nice if all the shares are priced less than 5c. Then everyone can buy DBS and SIA and the stock market will be very active, very good.

Matilah_Singapura said...

Derivatives are important because most people don't understand their mathematically-complicated structure, and thus don't know what the fuck they are buying or selling.

Derivatives tend to go toxic very quickly. Many of them are toxic to begin with. So they have the potential to cause financial collapses, failures and occasionally planet-wide crashes---also known as "return to reality".

Crashes are excellent. Post crashes are the time bottom-feeding scum sucking "opportunists" pick up unloved and distressed assets for a song, whilst blood flows in the streets, and those asshole in $600 shoes which drive the pedals of their $1 million cars contemplate suicide.

Please continue to gamble with derivatives, and drive all markets to silly over-valued territory----don't give up, you're nearly there :-))

Chua Chin Leng aka redbean said...

What they don't tell you about derivatives are more dangerous that what you think.

What they don't tell you about computers plugged into the exchange trading system, about algo and HFT and what they are doing are criminal.

Matilah_Singapura said...

@ RB 1157:

Yes, you are right: they don't tell you.

But under the philosophy of "caveat emptor" it is your duty of selfish due diligence to find out and edu-ma-cate yourself lah.

Please redbean, don't chase stupid people out of the market. These people eventually sacrifice their lives for the benefit of profits. As you've already indicated: zero sum game lah. We need people to LOSE, so some may reap profits.

Just like that Jewish Zombie Jezus who died as a proxy for all the sins---including future sins---of the entire species of humankind. People who lose in the market are just like him---except most of them don't have JC's buff body and 6-pack abs :-))

Anonymous said...

redbean
you are right about what they don't tell us.
When investors believe the market is not a level playing field ... they will not invest.
And the market will suffer a decline in trading volume.

Anonymous said...

This is exactly what is happening. It is irresponsible to ask clients, especially the young people, to invest in a market that is rigged and unfair with the computers trading against the innocent investors with big advantage of knowing what everyone is doing, buying and selling.

This is cheating and the provider of such a system must be sued for that.

Matilah_Singapura said...

What cock are you all toking lah? The idea of punting in a market is because you think you have an "advantage" over others with regard to "guessing" what the future price will be. Everyone has their own predictive tool---from complex stochastic methods to the village medium going into a trance and speaking nonsense.

Where got "level playing field"? In all zero sum games, there's never a level playing field. Even if you try to put one in, human ingenuity will eventually "game" the system, and you're back to square one. The more money there is to be made, the more people will be willing to look for "creative ways" to attain an advantage.

HFT is here to stay and will become increasingly more sophisticated. e.g. I have friends working on new-gen motherboards for specific HFT computers. Dun pray pray, there's a lot of investment in this space. These fuckers are SERIOUS.

Got human nature?

Anonymous said...

You stupid, dumbass, fuckhead, nitwit, idiot, brainless nuts, nincompooh, you think the stock exchange is a casino or what, operating a system to allow people to cheat one another? You ccb, talk some sense ok?

patriot said...

Walau eh, thought I will get some enlightening responses to my question posted above. However, no luck.
Allow me to add some values to the Question by offering my personal view.
I contend that SGX, like the Casinos, have little to do with most Sinkies' life.
So, even if it kaputs, it matters not to most.
Likewise is PAP, if it kaputs, Singaporeans will live on. So, I do not see SGX and PAP as vital to Singaporeans as they are made out to be.

patriot

Anonymous said...

patriot is correct.
it makes no difference to sinkies if SGX and pap both go kaput.
PAP policies do not benefit Singaporeans.
If PAP and LKY both go kaput ... so what?
Makes no difference to Singaporeans.

Anonymous said...

HFT in the New York Stock Exchange.
They now use lasers to further increase the speed.
Looks like SGX will be spending more money on infrastructure.

SOURCE:
http://www.zerohedge.com/news/2015-03-01/meanwhile-over-new-york-stock-exchange-lasers

Anonymous said...

Hi redbean.
More proof that seems to support your view that Premiere Li of China is sincere in his desire to better the lives of Chinese citizens.

"... tens of millions of Chinese watched, gripped and outraged, a 104-minute video entitled "Under The Dome" exposing the ugly truth about Chinese air pollution.
What is perhaps most stunning ... is that the Chinese government, so far, has not shut off the documentary, and recently appointed minister of environmental protection, Chen Jining, even praised the video; suggesting a growing conflict between Beijing and the Chinese industrial complex.

SOURCE:
http://www.zerohedge.com/news/2015-03-01/chinese-documentary-got-over-30-million-views-one-day

Matilah_Singapura said...

@ patriot:

Oh lah, I'll give my 2¢ worth:

>> Does SGX matters much to the average man in the street?

Hard to say. How do you define the "average man"? What you might think of what "the average man" is, is conjured up by your imagination, which will go its own way, make up its own story...i.e. highly inaccurate.

Since the SGX is in part owned by the govt, and the govt has lots of market cap from its very own "public" corporations, I would guess the SG.gov has the biggest self-interest in the SGX.

========

Supply of dark fibre

Most Singaporeans don't know what dark fibre is, and thus are unaware of the supply or the economics of this space. The supply has been quietly growing.

One of the players in the Singapore dark fibre space is an Aussie company Megaport who has been rolling out their dark fibre networks all around the island. They are so quiet, most people are unaware.

Now if a small company like Megaport can roll out dark fibre networks quietly, could they or similar companies be also rolling out super-speed fibre for the HFT folks?

I would say yes, why not? If there is money to be made, there will be people playing the game. For all you know the GIC or Temasek will form or buy a dark fibre companies and profit from the rollouts not only in Singapore, but in other Asian nation as well.

Can you imagine what the contracts would be worth to roll out dark fibre networks in big territories like China, India or Indonesia? You are talking about 100's of billions of dollars here.

We live in an era of Big Data. Big Data needs Big Bandswidth, and it also needs it to be fast and reliable.

As for HFT---they are just taking advantage of the increasingly awesome tech coming out. Google has over 1 million server now. They have mapped the world, they are mapping all the books ever written---not for humans to read, but specifically for machines to read. Algorithms are becoming more sophisticated, and in time our proto "digital life" (like our smart phones and search engines) will in time develop self-awareness and become "alive".

Biological life (human beings) are creating digital life---i.e. Artificial Intelligence machines which in a short time will become "conscious".

Got science fiction?

Matilah_Singapura said...

Another one of Google's "secret" projects which most people are unaware of. (testing done here in Australia)

Project Wing

Once these machines, and others like them, become autonomous, they'll be well on their way to be able to "think for themselves". They will "dream", and when they do their neural nets will wire and rewire. First you will see "proto-consciousness" In time, full consciousness will evolve.

Got 'I Robot'?

patriot said...

Good Morning Matilah Singapura and
All.

Thank You again MS for enlightening me. This Atheist does not believe in gods nor needs Science to be born. BUT, I will NEVER DENY THE EXISTENCE PF BELIIEVERS WHO BELIEVE ON THEIR GODS. The Fact is there are MORE BELIIEVERS IN GOD THAN THOSE THAT DO NOT.
As for Science, it is a tool that spiritual beings use, not just for survival, it is use more so to make survival more complex and competitive. Non human species do not have Science, they exist as Nature ordained. The Begining of the Human Species was as simple too, I surmise.

Extrapolating Matilah Singapura's Argument about the Importance of SGX to the Common man(man in the street), he seems to imply SGX or any other Stock Markets are essential in nature. I think Barter Trade is a lot better. I even read that Casinos are by extension of MS's Logic, just as essential as Stock Markets.

I think me am indeed anachronistic to this Era and should be implanted with Artificial intelligence to be in-sync with the Scientific Advancement. And so should all the Rest and be Matilah Singapura's 'I Robot'.

Are You an 'I- Robot' oredi?

patriot

patriot said...

'BUT, I will NEVER DENY THE EXISTENCE OF BELIEVERS WHO BELIEVE IN THEIR GODS'.

Correction to the Typo Mistake in my above comment.

My apology.

patriot