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The letter to Tharman
It's been an interesting week for the local stock market, the main news being that 1,225 trading reps and investors have signed a letter to finance minister Tharman Shanmugaratnam, asking for urgent action to be taken to restore retail confidence. Anectodal evidence from the writer is that had the signature-gathering exercise been kept open for longer than the few days that it was, a lot more signatures would have been gathered. How much is anybody's guess but I guess the point to note is that when you take into account an earlier online petition by TRs for SGX's CEO to step down, a statement last month from an association that represents small and middle cap companies that firms should look to other exchanges for their fund raising, and a flurry of letters to the press from members of the public that are criticial of retail participation, the conclusion has to be that there are many people out there who are very unhappy with how the market is developing.
SGX's response has been to issue statistics to support its assertion that the market is healthy and the retail sector is not only active but thriving. Make of these numbers what you will; what amazes me is the outpouring of scepticism that has accompanied these responses - it appears very people believe these numbers and are more inclined to accept the depressing picture painted by TRs.
I have a few observations to share.
First, many of the suggestions for improvement like scrapping the requirement to sit for exams before trading SIPs, improving short selling disclosure and faster resolution to investigations are outside of SGX's control. In fact, it is the Monetary Authority of Singapore (MAS) that plays a major role in this regard and should therefore also come forward with a statement of its own rather than leave SGX to respond (or to put it bluntly, to carry the can).
Second, can anyone really describe a market as being healthy and vibrant if almost all its frontline retail sales staff (for that is what TRs really are) are angry and frustrated? Not just a little angry but a lot? I don't think so. When you look beyond the numbers, the depth of emotion that's present is palpable and I tend to believe in the old saying that there's no smoke without fire. These are people whose job is to a) service the retail public; b) act as credit officers for the houses that employ them and c) chase clients who can't pay losses. These are crucial jobs that cannot be done properly if the underlying emotion is hugely negative. If these jobs are not being done, then the retail segment can hardly be in an optimal state.
Third, when TRs claim that public consultations should be handled by truly independent committees, I think they are referring to the decision to implement continuous full-day trading three years ago. Many simply cannot believe that their feedback was considered when the decision was made and until today, this is the biggest sticking point with many of them.
I believe that the relatively simple gesture of restoring the lunch break or reducing the trading hours would go a very long way in helping mend what appears to be a very unhealthy relationship between officialdom and the TR community. In an appeal to the Ministry of Manpower last mont to bring the lunch break back, the Society of Remisiers argued that it inhumane treatment, and pointed out that Thailand. Hong Kong, Malaysia and Indonesia pause for lunch whilst the Asian markets that have continuous trading, ie Taiwan and South Korea, are open for fewer hours than SGX.
Unfortunately for TRs, MOM said it cannot help because TRs are not employed by SGX which means intervention under the Employment Act is not possible.
There's obviously a lot more to this than meets the eye and hopefully, I'll be able to ponder some of the other issues in later postings. For now. all I can say is I hope something concrete comes from this appeal and that ways can be found to accomodate TRs concerns that are mutually beneficial to all parties.