Education of investors, not excessive regulations, to revive SGX
I REFER to the recent spate of reports on reviving the moribund Singapore stock market, with the latest being the Mark to Market column “MAS review group should build on market’s track record, seek to strengthen big local companies” (BT, Sep 2, 2024)
As an ex-remisier, I am appreciative of the multi-faceted efforts from many illustrious entities to restore SGX to its former glory days, labelled tongue-in-cheek by the writer as “the bad old days”. These efforts have been ongoing for years but having the Monetary Authority of Singapore step in is possibly an indication of the seriousness of the situation.
Conspicuously, all the efforts have almost without exception been top-down. Perhaps it is timely to hear the voices from the trading floor, from remisiers and dealers, the very people who hit the buttons that trigger daily market activity. Together with research analysts, they are the last-mile bridge to reach investors, retail and institutional, who are the very lifeblood of SGX. It’s like adults designing a playground without any thought of who might come to play. Likewise, the current efforts will bear little fruit without input from the main participants left “playing” the market. I hate to see history repeat itself – doing the same thing and expecting a different outcome just seems pointless, no matter how well intentioned.
No disrespect to the illustrious lists of commentators and reviewers doing their level best to revive SGX but it would surprise me if any of them would risk their professional reputations to recommend what is sorely needed – that there be less, not more, regulatory oversight.
This is so that the animal spirits are allowed to exhibit their natural instincts. It is no coincidence that the bull and bear are used to depict stock markets. There is no bull fight or bear raid that is devoid of excitement, without which there is no “restoring the vibrancy of the local market” as the writer rightly concluded.
This is not a call to promote gambling in the stock market – we already have two casinos for that. But it cannot be denied that the role of SGX is multi-faceted. Apart from being the barometer of the economy as reflected when successful businesses raise capital to fuel growth, the stock market also allows price discovery and valuation through active hedging and speculation.
Past mishaps like the penny stock fiasco and the collapse of Hyflux, etc, have given hedging and speculation a bad name, notwithstanding that these are integral components of any efficient stock market.
Shielding investors from the risk of losing money, while a worthy objective, is a fools’ errand. Remisiers have received calls from clients at the casinos telling them to come to where the real excitement is. There is also no shielding young people too, many of whom with easy access via the Internet, are losing monies dabbling in risky crypto, foreign currency, stock indices and other even riskier shady investments that are reported every now and then.
Risk and returns are two sides of the investment coin. It is education of the retail investor, where the most financial harm is often inflicted, that is needed in any investment venture, not just in stocks. Investors need to have the concepts of risk management and money management drilled into them so that they learn how to grow their hard-earned monies and not be decimated by poor financial decisions. All good trading systems incorporate these two features.
What is needed is not more regulations on SGX, which in all likelihood will drive another nail to further sink stock trading activity, to the detriment of all stakeholders.
Christie Loh
