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"If you link them, people will trade''?
I've heard quite a few comments over the past couple of weeks about the stark difference between conditions existing in the local market versus Hong Kong. These comments - largely derogatory - have been prompted by the huge upswing in HK stocks that has occured in massive volume. On some days, dollar volume there was 50 times that done here so quite understandably, local brokers are more than a little envious. The result has been to channel their frustration and envy towards local officialdom, primarily SGX.
"No quality IPOs and we're almost halfway through the year'' was one comment; another was "this is nothing but a penny market'', a reference to the large gains made in low-priced issues over the same time that HK blue chips were shooting up.
In my view, it's not entirely fair to compare Singapore with HK because the latter has a natural advantage vis-a-vis China. This is an advantage born wholly of geographical location and not from any innate superior abilities that officials or brokers there may possess versus their counterparts here. The HK market churns more business than Singapore because it is the natural choice for China companies, simple as that. Now with HK linked to China via the Shanghai-HK connect, it should not be surprising to see HK enjoying the activity it has.
I say if HK does well, fair play to the country and its brokers but that success should not be a springboard for more whinging or complaints here. Instead, critics should set aside their envy and knuckle down to the task of improving and growing the local market. How best to do this?
One course of action of course, would be a trading link with a suitable partner, with Malaysia the obvious choice. However, this idea is so fraught with political obstacles and baggage that it's been a no-go for many years. There's also a belief that the painful legacy left by Clob International's 1998 closure is simply too much for local investors to overcome and so it would be best not to restart any trading of Malaysian stocks here. I wonder though whether this is true. Like in the movie "Field of Dreams'' which featured a heavenly voice intoning "if you build it, he will come'', might it be a case of "if you link them, people will trade''? I think so. The Singapore investors/punter is now a much more discerning creature, much savvier when compared to the gung-ho punters of the 1990s. Offer them a tasty choice of decent options and they will trade.
For now though, a KL-S'pore link remains an unlikely development and so SGX is directing its efforts towards China, a topic we've dealt with in an earlier blog posting. I'm confident that there will be greater success this time round because the exchange knows it cannot afford to slip a second time. And who knows - in time to come, there may even be a trading link between China and Singapore. This was the subject of some speculation a week ago when Macquarie Equities Research discussed it in a research report and although SGX has said it isn't in talks to establish such a link, it isn't beyond the realm of possibility that we might see the two markets joined someday.
If this does materialise, I'm sure the critics would be silenced.