The Hollowing Of The Singapore Stock Exchange (SGX)

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By Sunny Tan

Singapore journalist, Chan Yi Wen of Business Times, referred to SGX in her feature on The Business Times, that “…..trading volumes remain in the doldrums.” (BT. 29-7-2015.P.25.) This story was also submitted to IPS Asia-Pacific, an UN affiliate.

She also wrote that the trading volume was 2.3 billion shares on 28 July 2015, but this is not the norm as the average trading volume has been around one billion shares for the local bourse for a number of years, one tenth of the daily volume of the Stock Exchange of Thailand (SET).

For the local bourse, a big chunk of the one billion shares are penny stocks, a reference to counters priced below one Singapore dollar.

Exacerbating the low volume situation is the policy of SGX to carry out the MTP or Minimum Trading Price in which counters need at least a trading price of 20 cents to remain listed on the mainboard. This has further demoralized retail traders.

Such a move prompted the listed companies to embark on share consolidations. To cite an example on how it works, a 15 Singapore cent counter, called A, can be consolidated to become a 30 cent stock.

Therefore an investor who owns 2,000 shares of counter A will find that after its consolidation he is the owner of 1,000 shares but priced at 0.30 cents per share.

The sad thing is that for most of the 37 counters that went through this exercise, the prices of most of them nosedived. For SGX to persist to carry out such an exercise on all the under 0.20 cent counters of this bourse, it will certainly make many of the holders of such counters angry and most of them are retail investors.

In another attempt to boost share trading, SGX organises equity education classes for any investor, on paid or pro bono.

Alongside such an effort, a number of private equity schools here are aggressively recruiting traders to attend their classes.

They all stage high pressure preview sessions to explain their methods and to showcase the trading successes of their alumni.

I went to the preview sessions of nearly all such companies here and what struck me is the affluent veneer of their offices and training rooms, and that they are located in the more expensive areas of the city.

Some of them have even expanded overseas so that they carry out the same kind of business in the other ASEAN countries.

Surely, one wonder why such listed companies are thriving at a time when the SGX is suffering from low daily volumes and also why the alumni of the private equity schools did not become aggressive equity players.

In another effort, SGX did away with minimum purchase of one lot or 1,000 shares per trade and reduced it to 100 shares of any of its nearly 800 counters.

It was meant to get the small time investors to buy the high priced blue chips. For example, the bank counter OCBC, is priced around $10,000 for 1,000 shares. Under the new rule, any investor can buy just 100 shares with about $1,000.

After its announcement, SGX staged high profile forums on investing in the local universities, targeting the soon to be affluent young men and women who will graduate, hold high paying jobs and hopefully become active stock market players.

In spite of such efforts, the SGX has failed to revive the slow motion trading pattern of the shrinking pool of investors.

Touching on the role of remisiers and their relevance to trading, one can assume that they work hard because their earnings come from the trades of their clients, many of them retail investors and so it is natural that they are doing all they can to create conditions that are conducive for trading.

But, can they do more so that the traders become excited and keen to trade and execute many more trades than what they normally do?

In such a milieu, there is the school of thought that the big crowd of remisiers is demoralised, so much so that they are not in the right frame of mind to incentivise the investors to trade.

Last year, the remisiers banded together and 1,000 of them put their names to a petition and submitted it to then Chief Executive Officer of SGX, Magnus Bocker, to ask for a meeting and to thrash out a list of problems. The CEO turned down such a request.

Commenting on the problem of the remisiers and the bourse, the president of SGX, Muthukrishnan Ramaswami, said revenue for this bourse’s securities business slipped eight per cent in fiscal 2015. (BT. 30-7-2015. p.6.)

The solution, he said during the recent press conference is to navigate the uncertainty in China and to work with the broker community here to make the market more attractive to investors.

What is implicit in his articulation is that by simply getting the brokers to get the investors to trade more and this will solve the problem.

If the solution is so simple then we would have seen the results years ago and we would not have seen the ho-hum trading that is now the ‘new normal.’

SGX’s new CEO, Loh Boon Chye, who took over from Magnus Bocker in July 2015, also has a solution to this problem. He said he will give priority to bringing the big and quality companies to listing here but added that to get them to plonk their money, he has to create for them a healthy and stable market environment. (BT. 30-7-2015. P.1.)

This newspaper report also stated that he had already contacted the remisiers and such a step shows that he is executing his policy to create the right kind of conditions for share trading.

But he has not met the rank and file retail investors yet, the backbone of SGX. Perhaps, he is aware that they are leaderless and so not contactable.

Though there is a power vacuum in the loosely structured and informal retail investors community but none of its many members is taking any initiative to form a investors body to champion their causes.

Given the fact that the SGX had implemented policies that the retail investors felt worked against them, for example, the MTP and so it is timely for them to form a credible body and manned by diehard retail investors.

Given such a situation the CEO should come down from his ivory tower penthouse office, located in the heart of the financial hub of the Lion City, to meet the Joe Sixpack retail investors and  to ‘walk, dine and talk’ with them and hopefully solve one another’s problems.

Note: The writer is a retail investor and free lance journalist.

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