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Being boring can have its benefits

Thursday, July 9, 2015 - 13:08

It was only a short while ago that I received numerous calls and Whats App messages from frustrated brokers who were watching with great envy the massive rallies occuring in Hong Kong and China. The gist of these messages was that the authorities here should be ashamed of themselves because of how dead the Singapore market was, a dismal state of affairs rendered all the more painful when compared with the activity in the Hang Seng and Shanghai.

 If I recall correctly, that acitivity was thanks to the Hong Kong-Shanghai connect and the novel argument that everyone should buy everything because everything was relatively undervalued to everything else. Confused? Don't be. It basically means "mortgage your house and simply buy'' which when you think about, is always a precursor to disaster.

In the meantime, some of the other messages I received  also praised China's officialdom for encouraging retail players to enter the market and to take on margin accounts to play with stocks, which in a backhanded way, was actually a critique of local regulators.

How soon they forget. A few weeks later and envy and praise has turned to scorn - the crash in HK and China stocks in the past few weeks is well-known and many here are blaming China's regulators for their incompetent response. More than a thousand counters suspended and daily falls of 5-6 per cent. Stop for a moment and think about the same happening here - at 3,300, a 5 per cent move in the Straits Times Index would amount to 165 points. If such a fall was to really occur, just imagine the panic which would ensue.

Is there anything to be learned from the ongoing crash in China? Apart from the obvious one about the dangers of over-leveraging to gamble in stocks, the other lesson is that sometimes, being boring like the Singapore market can have its benefits. Our market may not produce "multi-baggers'' as often as HK or Shanghai but at least it is well-run, well-policed and well-governed and this will ensure support in times of extreme chaos.