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9

SGX retail brokers appeal for government help (self.singapore)

submitted 1 year ago by NutlessMonkey

OVER 1,000 remisiers and investors have come together to appeal to Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam to help them resolve a wide range of issues plaguing the industry.

In a Jan 15 letter to Mr Tharman, they expressed unhappiness with the state and direction of the local stock market and urged immediate changes. Titled "Urgent Measures Needed to Rebuild Confidence in the Singapore Stock Market", the letter was written by investment specialist at a local broking house S Nallakaruppan and carried 1,225 signatures, mostly from retail trading representatives (TRs).

The issues raised and remedies proposed include separating Singapore Exchange's regulatory and commercial roles, raising the public portion of an IPO, restoring investors' trust in the local bourse, reviewing onerous rules for "high-risk" products, and listing of government-linked companies such as PSA and Changi Airports International to add breadth and depth to the market.

Pointing to the dismal market conditions, the letter noted that annual trading volume has fallen 26 per cent over the past five years from S$387 billion during the exchange's FY2010 to S$286 billion in FY2014. It attributed the slump to a loss of confidence among the investing public after Singapore-listed China stocks crashed in 2008-2010, and after the penny stock rout of 2013.

To rebuild confidence, some of the key recommendations contained in the letter were:

issuing at least 25 per cent of shares in an IPO to the public; this would avoid the farce of initial public offerings turning into initial private offerings;

better rules for short selling disclosure;

rethinking regulations for sophisticated instruments;

setting up truly independent committees when consulting the public on proposed policy changes;

raising the quality bar for CPF Trustee stocks and lifting the limit for investment in equities from 35 to 80 per cent of the CPF Ordinary Account;

transferring long-suspended stocks with governance issues to a high-risk third board with cash upfront trading;

providing the market with regular updates on investigations such as the current probe into the October 2013 crash of LionGold, Blumont and Asiasons;

separating SGX's regulatory and commercial roles.

"In the haste to rebuild the Singapore bourse after the delisting of more than a hundred Malaysian Clob shares," the letter said, "listings from China were admitted with limited consideration given to important issues such as corporate governance and enforcement across borders."

Also mentioned was 2008's Lehman Brothers' bankruptcy that led the Monetary Authority of Singapore (MAS) to classify perceived higher risk products as Specified Investment Products and Excluded Investment Products, and to introduce stringent rules that require TRs and clients to sit for exams before trading these instruments.

"Singapore could be the only country in the world to have such rules," said the letter. "This has created a lot of confusion, resulting in many in the investing public staying out altogether. All these classifications should be removed and a simple one or two-page Risk Disclosure statement should be signed by the investing public before they are allowed to buy sophisticated products . . . we can educate the investing public about the various risks but we cannot regulate risk."

When contacted, Mr Nallakaruppan told BT that the stock market was in its worst state since he joined the industry 20 years ago, and it was the dire situation than prompted him to act. Many remisiers contacted by BT were familiar with the contents of the letter as many had signed it.

"For these many people to take the drastic step of signing a letter to the minister, it has to mean something is very wrong," said a dealer with a bank-based brokerage. "It's important to note that this is not a finger-pointing exercise, but a call for everyone to work together to bring about real improvements."

Jimmy Ho, president of the Singapore Society of Remisiers, pointed out that the number of signatures obtained was significant and that it represents almost half the society's members. "With the bread and butter of several thousand Singaporeans (remisiers, dealers and backroom support staff) and their families at stake, it is only fair that the situation . . . be brought to the government's attention."

Call to restore market lunch hour

THE Singapore Society of Remisiers (SOR), which had appealed to the Ministry of Manpower (MOM) for help to reinstate the lunch break for the stock market, has been told that the ministry is unable to address its concerns.

"As remisiers are self-employed agents and as there is no employer-employee relationship with the Singapore Exchange Ltd, we wish to inform you that the ministry is unable to address your concerns under the Employment Act," said MOM.

"Your society may wish to advise remisiers to make arrangements for staggered lunch breaks which is a common practice adopted by service-related companies that have continuous operations. Nevertheless, we will forward a copy of your letter to the Singapore Exchange so that they can engage your society on the concerns raised."

In its Jan 15 letter to MOM, the society argued that having a lunch break is a "basic human right to meet a basic human need" and that it is unethical not to allow a break for lunch.

The SGX introduced continuous all-day trading in 2011, removing the 90-minute break which used to be in place from 12.30-2pm.

In its appeal, SOR pointed out that remisiers used to meet clients over lunch in order to determine client needs and build trust. Also, most other Asian markets pause for lunch, for example 12.30-2pm in Malaysia, 12-1pm in Hong Kong, 12.30-2pm in Thailand, and 11.30am-12.30pm in Japan.

It pointed out that markets like South Korea and Taiwan, which do not have lunch breaks, are open for shorter hours than the eight hours and 35 minutes here - six hours in South Korea, and four hours and 30 minutes in Taiwan.

(http://www.businesstimes.com.sg/stoc...laguing-market)

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[–]hatuahOk lor 8 points 1 year ago

In the 1st place, SGX shouldn't even be listed. When companies are listed, their main focus is profit after tax to please their shareholders. The interests of their customers, IE investors are secondary.

Just look at the ABL saga which wiped out S$8b in just 3 days. They are still being traded actively and those that trade frequently will know that up till this day, these stocks are still being manipulated by the big boys.

And there are counters which I shall not name that are blatantly fooling around with investors. Announcing big news such as buying over million dollar magnesium mines or timber forests with guaranteed profits. Ramping up investor interests, only to call off the deal after the big boys have unloaded their shares and taken the profit.

Even blue chips such as Olam, Singpost and SMRT have rampant insider trading. Just look at their charts last year, they were already being heavily bought by the insiders prior to the announcement of the major announcements.

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[–]jswk 2 points 1 year ago

The point you made abt olam singpost and smrt is quite interesting. What are some of the major announcements you're referencing?

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[–]hatuahOk lor 5 points 1 year ago

Singpost: Ali baba took an 8% stake in Singpost. This obviously is good news and the share price soared after the official announcement. But prior to that, you can already tell from the chart that the share was being bought up by insiders who already knew about the announcement.

SMRT: Revision of the public transport infrastructure to allow the govt to own the public transport fixed assets such as buses and railways. Prior to the official announcement, the share price was creeping up as well.

Olam: Temasek taking up a bigger stake in Olam. Same thing, share price went up even before the official announcement.

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[–]NutlessMonkey[S] 2 points 1 year ago

Not to mention Keppel Land. Thing ran up 2-3 days before the privatization offer by Keppel Corp.

The amount of information leaks on this exchange is amazing, and it's crazy that no one has been charged yet.

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[–]Razorwindsg 1 point 1 year ago

Cos it's hard to prove without an army of crazed journalists hunting down big boys daily lives...

Most companies only make employees sign the sox agreement and do elearning but hardly will enforce or reiterate the importance of non disclosure and non trading for related industry stocks.

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[–]hatuahOk lor 1 point 1 year ago

In recent years, I can only recall of one guy getting arrested for insider trading.

Obviously the big boys are still running unscathed. This guy merely bought 140 lots of 20+ cent share and he got arrested.

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[–]useme 1 point 1 year ago

When companies are listed, their main focus is profit after tax to please their shareholders. The interests of their customers, IE investors are secondary.

How are investors and shareholders different in this context? Am asking as a lay person.

Also, as far as I know, the problems you mentioned are present in every stock exchange in the world. Are you suggesting we should not have stock exchanges at all? Or is there some "model" stock exchange somewhere that the rest of the world can follow?

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[–]malaysianlah 2 points 1 year ago

I think he meant SGX the company shouldn't be listed. The body that administers the board shouldn't be under profit pressures.

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[–]useme 1 point 1 year ago

Ah, I see. Thank you.

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[–]dashrandomI'm basically a terrifying mirror. No wonder people want to lie 3 points 1 year ago

ELI5 What are the problems with SGX? I always thought we were one of the more stable stock exchanges.

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[–]hatuahOk lor 6 points 1 year ago

In 2013, there were 3 counters (Asiasons, Blumont & Liongold) that were being played up by this syndicate. Basically these 3 companies were penny stocks that didn't have much fundamental strength.

However, this group of guys came in an played the stock up. A buys the stock at 10 cents, B buys from A at 15 cents, C buys from B at 20 cents, A buys the stock back from C again at 25 cents. Effectively, there was no change in ownership of the stock as the ones playing were people from the same syndicate. Due to the phenomenal share price increase, normal retail investors were attracted by it and started buying the share at ridiculous prices as well.

Imagine a small loss making company with little assets to back them up being worth as much as blue chip firms like SMRT. IIRC, the peak share price of Blumont was around $2. SGX finally realised what was going on after many months of rampant manipulation and investigated the 3 firms.

After the investigation, the 3 counters plunged by S$8 billion in just 3 days. Obviously the investors got burnt and had to sell their other shares to pay up for the huge losses. As a result, almost the entire market crashed after that and most retail investors who got burnt stopped investing totally.

Ever since that incident, trading volume has dropped to record lows as investors' confidence in our local stocks is extremely low.

And to add on, google about S-Chip saga in Singapore. It's basically about firms from China listing on the SGX. But the horrifying part is that they are just using SGX as a market to scam investors. They create fraudulent financial statements by overstating their income and assets. Yes, the frauds were so well planned that the auditors couldn't detect them till a few years down the road.

After the auditors realised that there was fraud, they issue a public notification and SGX suspended trading of these shares. Basically, if you are a shareholder of such a firm, all your money will get stuck as you won't be able to sell the shares. And there was not just 1 incident but multiple incidents that occurred. How does one invests when they can't even trust the exchange?

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[–]bot882361 5 points 1 year ago

Short reply, look at the decline in the annual trading volume. Income of brokers and remisiers are directly linked to a percentage of that annual trading volume, depending on the market. I'm not sure what the market practice is for Singapore, but transaction costs can be about 0.5% to 1%. So their slice of the pie just shrank.

So to revive their income, they are trying to get two groups of people to start trading, institutions and retail.

Institutions typically follow the investment theme of the day, which happens to be avoid emerging markets and watch out of the taper. So they haven't been actively trading in the SGX which is actually a proxy stock market for a lot of regional companies looking for listing. Singapore itself lacks credible companies in the home front, so companies out of Indonesia, Malaysia and China are attracted to listing because listing rules are surprisingly more lax, and it lends greater credibility to international investors. Singapore was historically seen as a capital market where investors' protection was available among the other Southeast Asian countries (emerginc markets) which have rampant corruption and very little investor rights. But that image has eroded with the number of dubious China company listings and penny stock market.

Right now, institutional investors are preferring to invest directly into emerging markets without Singapore as proxy since there's very little credibility there.

As for the retail guys, this is even more laughable. Investor education there is terrible, among people with money, and the stock market isn't the only market that is looking for investors. I have noted other competing markets that are crazy, namely the private banking sector and retail bonds. The perception of bonds as a less risky investment product has misled these investors to look for safer returns in junk bonds which institutional investors will not even touch, yielding 5-year non-call 3 at 7% to 8%, against fixed deposit rates of below 1%. Best part is that these bonds are issued by familiar names in the market, companies that have appeared in the news very often and have a very good relationship with the media, but in fact, no one in their right mind will lend them money if they look at the company's financials. But because the private banking brokers are getting 1-2% rebates on selling these toxic goods, people have lapped them up.

So because the focus is elsewhere, there is very little interest in the traditional stock market, and the brokers are trying to restore confidence in it so that investors will start coming back. This is more symptomatic of a failed market, and there's a lot more that needs to be done.

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[–]malaysianlah 2 points 1 year ago

As a former auditor.. I hear horror stories of singapore listed companies with real dodgy operations in less developed markets. I always found it strange that sgx doesnt really stop and reject all sort of dodgy companies to go ahead with listing

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[–]dashrandomI'm basically a terrifying mirror. No wonder people want to lie 1 point 1 year ago

Thanks! Can't say I understood all of that but it helped!

P.s. What's a retail investor?

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[–]NutlessMonkey[S] 1 point 1 year ago

The average individual. Anyone who buys stocks for their personal accounts, and is not acting on behalf of a mutual fund, hedge fund, pension etc.

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[–]bot882361 1 point 1 year ago

If it helps as imagery, just think of everyday people with an everyday normal boring job, but they opened a share trading account with a broker and trades stocks during their free time based on the news, their friends' tips and coffeeshop talk.

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[–]malaysianlah 2 points 1 year ago

Most singaporeans invest in the us or japan or uk. Or these days emerging markets china and India

Sgx never quite attracted me other than reits.

Or like me.. Invest in klse! Best share market for me (due to inherent familiarity with thw companies and the ongoing events in the market. Bfm also does a good job of keeping us informed) ! Plenty of syndicates as well.. so u gotta know what u touch, but the securities commission has been pretty good, even scuttled a few spacs that was trying to get listed

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[–][deleted] 1 year ago

[deleted]

[–]malaysianlah 1 point 1 year ago

Haha stick to midcap stocks. Small cap stocks r speculators play things. Midcap stocks tend of have the big boys to give some balance

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[–]malaysianlah 1 point 1 year ago

Anyway I did some more research on clob and... it seems like a structural issue arising from capital controls of the 1998 crisis.. not rly becasue the shares were crappy...

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[–]Snowstormzzz 2 points 1 year ago

Chicken and Egg issue for me. SGX has some really low volume, so it's hard to make any returns in a specific period of time when it is so slow moving.

So because of the low volume, I look to other exchanges (HKEX for me), and thus inherently contribute to the low volume issue in SGX.

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[–]KeythKatzwhat am i saying 1 point 1 year ago

Those rules regarding SIPs are the reason why I don't want anything to do with the Singapore market. It's ridiculous to be forced to stock-pick when index funds and ETFs are generally much safer, but are listed as SIPs.

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