Our New Year's Resolutions for investors, and others
Excuse my cynicism, but despite improvements over the years in corporate governance there is still a lot to be done. I am not just addressing senior executives and their investor relations and public relations hacks here, but also institutional investors who treat the market – and, by extension, retail investors, with contempt. So, here are a few New Year's resolutions for all those people to cut and paste on their notice boards, who enjoys pulling a caper in the stock market which may not transcend the letter of the rules but leave to be desired where ethics and sometimes common decency are concerned.
1. "I will no longer try to make my stock picking skills look better than they really are by window-dressing my funds". This term is used so often it is starting to sound acceptable to do so. Window-dressing refers to the practice by some fund managers and some institutional investors to make their portfolios look better than they really are. They buy up shares of their poorest-performing investments in the days leading up to the end of the new year, causing prices to rise. Early in the new year, once the inflated prices for the annual report and next year's marketing material have been captured, those shares are dumped again. Or buying shares in the companies they should have invested in twelve months earlier, the year's top performers to be able to claim that, yep, they're in our portfolio. It's a con, and every owner of a unit trust should ask the manager what their window-dressing activities were.
2. "I shall not delay the release of news so I can cluster them later for better effect". Folks, look out for the word "recent" or "recently" whenever you see a press release from a publicly listed company. Specifically, check out whether they are reporting contracts which have been won "recently". In the worst cases, this word is a red flag to poor adherence to continuous disclosure obligations. After all, if the contract was won "recently", why wasn't it announced at the time? The answer is, of course, that the PR and IR people (there is nary a difference) decided to hold off on releasing news of a small contract until they have several small contracts to bleat to the media over. It's an unfortunate strategy which has its origins in the fact that small contracts don't make the news – only those with sizeable dollar amounts. But that's not the point. Small contracts all add up and should be disclosed as and when they were signed.
3. "I will ensure my press release doesn't deviate too far from the facts of the statutory announcement". One lesson investors (and an embarrassing number of journalists) surely need to learn is not to rely on press releases, like most of the mainstream media do. Read the statutory announcement! (Or read Investor Central's reports, which are based on the statutory announcement). Don't investors realise how press releases conveniently omit unpleasant facts in the name of brevity? Press releases are there to simplify legalistic announcements. Not to cover up stuff.
4. "I will not ring up reporters after interviews and pressure them to omit stuff the CEO shouldn't have said". Most investors who watch television or read newspapers have no idea how manufactured news actually is. There is clearly a danger for CEOs to be so media trained they end up losing credibility. But often, when a CEO says stuff s/he shouldn't it's managed by the PR hack through a phone call after the interview. It's remarkable that in a country where a cement truck driver who tried to slip a traffic policeman fifty dollars to "smooth over" a traffic infringement gets six weeks jail (deservedly in my view), yet the unpaid complicity between media and public relations staff to make companies chief executives who mouth of like loose cannons look good is considered acceptable and common practice. Try ringing a journalist to massage facts after an interview in Australia. The fact you were trying to do so will become the story!
Happy New Year, everybody!
Mark Laudi
1. "I will no longer try to make my stock picking skills look better than they really are by window-dressing my funds". This term is used so often it is starting to sound acceptable to do so. Window-dressing refers to the practice by some fund managers and some institutional investors to make their portfolios look better than they really are. They buy up shares of their poorest-performing investments in the days leading up to the end of the new year, causing prices to rise. Early in the new year, once the inflated prices for the annual report and next year's marketing material have been captured, those shares are dumped again. Or buying shares in the companies they should have invested in twelve months earlier, the year's top performers to be able to claim that, yep, they're in our portfolio. It's a con, and every owner of a unit trust should ask the manager what their window-dressing activities were.
2. "I shall not delay the release of news so I can cluster them later for better effect". Folks, look out for the word "recent" or "recently" whenever you see a press release from a publicly listed company. Specifically, check out whether they are reporting contracts which have been won "recently". In the worst cases, this word is a red flag to poor adherence to continuous disclosure obligations. After all, if the contract was won "recently", why wasn't it announced at the time? The answer is, of course, that the PR and IR people (there is nary a difference) decided to hold off on releasing news of a small contract until they have several small contracts to bleat to the media over. It's an unfortunate strategy which has its origins in the fact that small contracts don't make the news – only those with sizeable dollar amounts. But that's not the point. Small contracts all add up and should be disclosed as and when they were signed.
3. "I will ensure my press release doesn't deviate too far from the facts of the statutory announcement". One lesson investors (and an embarrassing number of journalists) surely need to learn is not to rely on press releases, like most of the mainstream media do. Read the statutory announcement! (Or read Investor Central's reports, which are based on the statutory announcement). Don't investors realise how press releases conveniently omit unpleasant facts in the name of brevity? Press releases are there to simplify legalistic announcements. Not to cover up stuff.
4. "I will not ring up reporters after interviews and pressure them to omit stuff the CEO shouldn't have said". Most investors who watch television or read newspapers have no idea how manufactured news actually is. There is clearly a danger for CEOs to be so media trained they end up losing credibility. But often, when a CEO says stuff s/he shouldn't it's managed by the PR hack through a phone call after the interview. It's remarkable that in a country where a cement truck driver who tried to slip a traffic policeman fifty dollars to "smooth over" a traffic infringement gets six weeks jail (deservedly in my view), yet the unpaid complicity between media and public relations staff to make companies chief executives who mouth of like loose cannons look good is considered acceptable and common practice. Try ringing a journalist to massage facts after an interview in Australia. The fact you were trying to do so will become the story!
Happy New Year, everybody!
Mark Laudi
Labels: New Year, new year's resolution, window dressing, Window-dressing
We Support The Call: Shorten Trading Hours
The Malaysian Investors' Association has finally proposed for Bursa what should also be applied to the Singapore Exchange: shorter trading hours. Its president, Datuk Dr P.H.S. Lim points to the much larger markets in Hong Kong and New York (and, I might add, Australia), whose trading hours are only around six hours in duration, instead of eight. "Shorter trading hours are good for all those engaged in the stock security industry as brokers and market researchers have more time for digesting overnight financial information of Europe and the US," he said in a statement. We concur. But persuading local investors will not be easy.
Shortening trading hours to 10am to 4pm has merit for three reasons:
1. More time to digest the news. The Singapore Exchange actively encourages companies to make their market moving announcements after the market closes, so investors have more time to decide how those announcements should affect their positions. A noble motivation. The SGX should give investors an extra hour in the morning to do so.
2. Not enough time to report the news. Datuk Dr Lim says "it is also good and more healthy for investors who could spend less time in tracking the financial markets. It is also good for the media."
Amen!
The fact is, it is a struggle for journalists to plough through all the news and write something meaningful – beyond re-writing press releases – particularly during earnings season. The quality of business reporting today should, and possibly could, improve if reporters weren't hard up against a deadline to report on ten or more financial statements.
If trade stops at 4pm instead of 5pm, and therefore companies can start reporting their significant announcements one hour earlier, that's an extra hour reporters have to do a good job with their stories.
3. The lunchbreak is so 19th Century. It's quaint, but outdated, for the market to stop just because it's lunchtime. Frankly, it might be very good for the waistlines of the broking community to scrap this nonsense of stopping for lunch. In an era of global electronic trading and demutualised exchanges it's preposterous that the whole market has to stop just because a few blokes at their trading desks want to go for makan.
But, even though I think it's a great idea, I don't think it will happen. Alas, the SGX probably thinks, if it works, why fix it. There is some merit to this thinking, because there doesn't appear to be a groundswell for change.
But I'm not suggesting the SGX goes the way of the Philippine Stock Exchange, which shortened trading hours to just three to increase the "scarcity" of the trading window and therefore the market action. I have heard the view expressed, that once the SGX opens and investors buy or sell on the news, say, in the first 90 minutes of trade, the next two hours are a bit of a waste of time. The charts don't really bear this out (above).
My fear is, though, that by keeping trading hours where they are and not moving with the times the SGX may be seen to be behind the times.
Mark Laudi
Should trading hours be shortened, and lunchtimes scrapped?
Go to the Investor Central Blog to make your comment.
Shortening trading hours to 10am to 4pm has merit for three reasons:
1. More time to digest the news. The Singapore Exchange actively encourages companies to make their market moving announcements after the market closes, so investors have more time to decide how those announcements should affect their positions. A noble motivation. The SGX should give investors an extra hour in the morning to do so.
2. Not enough time to report the news. Datuk Dr Lim says "it is also good and more healthy for investors who could spend less time in tracking the financial markets. It is also good for the media."
Amen!
The fact is, it is a struggle for journalists to plough through all the news and write something meaningful – beyond re-writing press releases – particularly during earnings season. The quality of business reporting today should, and possibly could, improve if reporters weren't hard up against a deadline to report on ten or more financial statements.
If trade stops at 4pm instead of 5pm, and therefore companies can start reporting their significant announcements one hour earlier, that's an extra hour reporters have to do a good job with their stories.
3. The lunchbreak is so 19th Century. It's quaint, but outdated, for the market to stop just because it's lunchtime. Frankly, it might be very good for the waistlines of the broking community to scrap this nonsense of stopping for lunch. In an era of global electronic trading and demutualised exchanges it's preposterous that the whole market has to stop just because a few blokes at their trading desks want to go for makan.
But, even though I think it's a great idea, I don't think it will happen. Alas, the SGX probably thinks, if it works, why fix it. There is some merit to this thinking, because there doesn't appear to be a groundswell for change.
But I'm not suggesting the SGX goes the way of the Philippine Stock Exchange, which shortened trading hours to just three to increase the "scarcity" of the trading window and therefore the market action. I have heard the view expressed, that once the SGX opens and investors buy or sell on the news, say, in the first 90 minutes of trade, the next two hours are a bit of a waste of time. The charts don't really bear this out (above).My fear is, though, that by keeping trading hours where they are and not moving with the times the SGX may be seen to be behind the times.
Mark Laudi
Should trading hours be shortened, and lunchtimes scrapped?
Go to the Investor Central Blog to make your comment.
Labels: Bursa Malaysia, Malaysia Investors' Association, P.S.H. Lim, Philippine Stock Exchange, PSE, SGX, shorter trading hours, Singapore Exchange
Manufacturing Data: Hurray For Oilrigs
It's incredible to think that one of the factors behind the apparently slowing US economy is actually helping Singapore's economy at a time it really needs it: with electronics manufacturing still slowing, it's the booming oil sector which is coming to the rescue. This leads me to my favourite subject where oil prices, and petrol prices in Singapore are concerned: we are always so keen to be unique – when will we be the only country in the world that outlaws vehicles with conventional engines?
Ask any driver about petrol prices and they'll tell you they flinch all the way to the nearest MRT station every time they pay more than a hundred dollars for a tank of petrol. Not even the supposed "we added it on so we can offer a discount"-discount, or the pathetic "free gifts" offered by petrol stations are of any consolation. It's an irony that the factor that is causing so much pain at the pump is helping Singapore's economy at a time when we're dreading what's going to happen next year. According to a Reuters report, carried on the Business Times website, Keppel Corp and SembCorp Marine, two of the world's biggest oil rig makers, boosted Singapore's total manufacturing output growth to 5.8% in November, compared to October. But this was short of the 7% expected by economists, who get paid to get it right, thanks to the biggest fall in factory orders in a year, and a pharmaceutical sector that's apparently beset by the dubious problem that people all over the world are healthier (can this be right?). Here's the EDB release.
But back to petrol prices and Singapore. Can you imagine the phenomenal global reputation Singapore would achieve by doing what Australia proposed to do with incandescent light bulbs: outlawing conventional engines. According to a report by Lehman Brothers, Singaporeans consume more energy per capita than the United States, China, Australia and virtually every other country except Qatar (see page 96). To be frank, I don't quite understand how this is so, given that car ownership is proportionately low, we don't tend to drive long distances or at high speeds and while we generate a lot of electricity it's not like we all drive gas guzzling 4WDs. According to figures supplied by the Ministry of the Environment and Water Resources (which, to its credit, has a strategy to, among others, promote the use of cleaner fuels and green vehicles), 2004 figures show cars made up 19% of emissions. But I guess it doesn't help that the Airbus A380 – the first of which was delivered to Singapore Airlines a few months ago – has a carbon footprint the size of bigfoot, many people spend a lot of money on air conditioning, not to mention the high number of completely underutilised Mercedes and BMWs cars that ply our roads.
Bottom line: we should reduce energy consumption, and converting everyone to hybrid or electric cars would be a fabulous step.
But here's why I think this idea will never take off:
1. Oil companies are big investors. We owe a lot to Shell and others who've invested billions in petrochemical plants on Jurong Island. Labrador Park near HarbourFront was once a site of a Shell facility, established decades ago. Unless we can position a move to hybrid or electric vehicles as showcasing their stated efforts to harness renewable energy sources, we are going to be seen as pretty thankless hosts.
2. Petrol taxes are a big revenue earner. Every litre of petrol carries fuel excise of 44 cents per litre, plus 7% GST, according to Shell. Do the maths. Can we forego this revenue?
3. Too many decision makers drive big cars. Fact is, until and unless the guys who are in a position to decide to move everyone to hybrid or electric cars stop driving big Mercs and Beemers, they're not going to promote a wholesale shift away from gas guzzlers. After all, would you outlaw the comfortable S-Class you drive to the office each day?
The odds are stacked against it. But still, a big shift away from conventional engines to hybrids or electric cars would be amazing for the global climate change discussion. It shouldn't worry us one bit that we would still be the world's biggest producer of oil rigs.
Mark Laudi
Ask any driver about petrol prices and they'll tell you they flinch all the way to the nearest MRT station every time they pay more than a hundred dollars for a tank of petrol. Not even the supposed "we added it on so we can offer a discount"-discount, or the pathetic "free gifts" offered by petrol stations are of any consolation. It's an irony that the factor that is causing so much pain at the pump is helping Singapore's economy at a time when we're dreading what's going to happen next year. According to a Reuters report, carried on the Business Times website, Keppel Corp and SembCorp Marine, two of the world's biggest oil rig makers, boosted Singapore's total manufacturing output growth to 5.8% in November, compared to October. But this was short of the 7% expected by economists, who get paid to get it right, thanks to the biggest fall in factory orders in a year, and a pharmaceutical sector that's apparently beset by the dubious problem that people all over the world are healthier (can this be right?). Here's the EDB release.
But back to petrol prices and Singapore. Can you imagine the phenomenal global reputation Singapore would achieve by doing what Australia proposed to do with incandescent light bulbs: outlawing conventional engines. According to a report by Lehman Brothers, Singaporeans consume more energy per capita than the United States, China, Australia and virtually every other country except Qatar (see page 96). To be frank, I don't quite understand how this is so, given that car ownership is proportionately low, we don't tend to drive long distances or at high speeds and while we generate a lot of electricity it's not like we all drive gas guzzling 4WDs. According to figures supplied by the Ministry of the Environment and Water Resources (which, to its credit, has a strategy to, among others, promote the use of cleaner fuels and green vehicles), 2004 figures show cars made up 19% of emissions. But I guess it doesn't help that the Airbus A380 – the first of which was delivered to Singapore Airlines a few months ago – has a carbon footprint the size of bigfoot, many people spend a lot of money on air conditioning, not to mention the high number of completely underutilised Mercedes and BMWs cars that ply our roads.
Bottom line: we should reduce energy consumption, and converting everyone to hybrid or electric cars would be a fabulous step.
But here's why I think this idea will never take off:
1. Oil companies are big investors. We owe a lot to Shell and others who've invested billions in petrochemical plants on Jurong Island. Labrador Park near HarbourFront was once a site of a Shell facility, established decades ago. Unless we can position a move to hybrid or electric vehicles as showcasing their stated efforts to harness renewable energy sources, we are going to be seen as pretty thankless hosts.
2. Petrol taxes are a big revenue earner. Every litre of petrol carries fuel excise of 44 cents per litre, plus 7% GST, according to Shell. Do the maths. Can we forego this revenue?
3. Too many decision makers drive big cars. Fact is, until and unless the guys who are in a position to decide to move everyone to hybrid or electric cars stop driving big Mercs and Beemers, they're not going to promote a wholesale shift away from gas guzzlers. After all, would you outlaw the comfortable S-Class you drive to the office each day?
The odds are stacked against it. But still, a big shift away from conventional engines to hybrids or electric cars would be amazing for the global climate change discussion. It shouldn't worry us one bit that we would still be the world's biggest producer of oil rigs.
Mark Laudi
Labels: combustion engines, electric cars, excise, hybrid cars, MEWR, petrol taxes, Shell
Climate Change: Investors Play A Part Too
Indonesia is getting into the alternative energy business in a big way – clearing forests and peatlands to make way for oil-palm plantations.
Palm oil is a by-product of the oil palm tree and is used for cooking and as food additives.
More recently, it has been found to be a relatively clean-burning alternative source of energy – biodiesel – a discovery which has pushed palm oil prices up to never-before-seen levels.
Indonesian residents who own oil palm plantations have become better-off, selling more than just fruits.
This discovery of palm oil as biodiesel could also be seen as beneficial to the rest of the world, given how we can become a tad bit less reliant on fossil fuels.
But would you still be jumping for joy if you found out forests are being burnt down to create space for oil palm plantations, or that Indonesia's deforestation is among the highest in the world?
A recent issue of Time Magazine wrote that “burning and clear-cutting not only eliminates one of the planet's crucial air-filtration systems, the process also releases even more carbon dioxide into the air, in smoke or as gases released during the decomposition of forest waste.”
You can imagine the irony then, when Bali hosted world leaders in a climate-change discussion over the last week.
There are a few reasons climate-change is really a long and winding road.
First, it is tough for businesses to be both economically responsible and philanthropic at the same time.
Being economically responsible means being economically efficient, and generating the most returns for shareholders. Most companies get the most out of their operations in developing countries, using cheaper labor and less energy-efficient technology. Even if some businesses want to make the shift to environmentally-friendly technologies, anticipating how much more profitable competitors will be using cheaper technologies would probably keep them from going ahead with their plans.
Second, the world's three largest emittors of greenhouse gases are playing the blame game and pushing the onus onto one another.
According the Wall Street Journal, “China wants developed nations like the US to share cutting-edge renewable-energy technology with the developing world at reduced costs,” but American companies do not want to sell these technologies at “cut-rate prices”. US officials may also be worried that “innovative technologies” deployed to China could be copied.
The latest climate change pact adopted in Bali (after rounds of negotiations) was a vague “we'll-do-our-best” agreement.
So what can be done to have all countries jump onto the climate change bandwagon?
For starters, the five permanent members of the United Nations should ratify any climate change protocols.
The United Nations should then mandate that all member nations do so as well.
Because only a global change in mindset and way of doing things can ensure that everyone plays their part in climate change, without anyone losing out because of it.
For investors, perhaps we should be a little more philanthropic in our investments and invest in businesses that make efforts to reduce carbon emissions in their operations.
We should also find out if alternative energy companies are conducting their businesses ethically before we consider investing in them.
Returns from such evironmentally- and ethically-responsible companies may not be as lucrative as those that employ cheaper means, but treat the extra amount you could have gotten as an investment in your future.
After all, the earth is your home too.
And you sure wouldn't want to be worrying about excessive exposure to UV rays every time you step out of the house because of the huge hole in the ozone layer.
Serene Lim
Palm oil is a by-product of the oil palm tree and is used for cooking and as food additives.
More recently, it has been found to be a relatively clean-burning alternative source of energy – biodiesel – a discovery which has pushed palm oil prices up to never-before-seen levels.
Indonesian residents who own oil palm plantations have become better-off, selling more than just fruits.
This discovery of palm oil as biodiesel could also be seen as beneficial to the rest of the world, given how we can become a tad bit less reliant on fossil fuels.
But would you still be jumping for joy if you found out forests are being burnt down to create space for oil palm plantations, or that Indonesia's deforestation is among the highest in the world?
A recent issue of Time Magazine wrote that “burning and clear-cutting not only eliminates one of the planet's crucial air-filtration systems, the process also releases even more carbon dioxide into the air, in smoke or as gases released during the decomposition of forest waste.”
You can imagine the irony then, when Bali hosted world leaders in a climate-change discussion over the last week.
There are a few reasons climate-change is really a long and winding road.
First, it is tough for businesses to be both economically responsible and philanthropic at the same time.
Being economically responsible means being economically efficient, and generating the most returns for shareholders. Most companies get the most out of their operations in developing countries, using cheaper labor and less energy-efficient technology. Even if some businesses want to make the shift to environmentally-friendly technologies, anticipating how much more profitable competitors will be using cheaper technologies would probably keep them from going ahead with their plans.
Second, the world's three largest emittors of greenhouse gases are playing the blame game and pushing the onus onto one another.
According the Wall Street Journal, “China wants developed nations like the US to share cutting-edge renewable-energy technology with the developing world at reduced costs,” but American companies do not want to sell these technologies at “cut-rate prices”. US officials may also be worried that “innovative technologies” deployed to China could be copied.
The latest climate change pact adopted in Bali (after rounds of negotiations) was a vague “we'll-do-our-best” agreement.
So what can be done to have all countries jump onto the climate change bandwagon?
For starters, the five permanent members of the United Nations should ratify any climate change protocols.
The United Nations should then mandate that all member nations do so as well.
Because only a global change in mindset and way of doing things can ensure that everyone plays their part in climate change, without anyone losing out because of it.
For investors, perhaps we should be a little more philanthropic in our investments and invest in businesses that make efforts to reduce carbon emissions in their operations.
We should also find out if alternative energy companies are conducting their businesses ethically before we consider investing in them.
Returns from such evironmentally- and ethically-responsible companies may not be as lucrative as those that employ cheaper means, but treat the extra amount you could have gotten as an investment in your future.
After all, the earth is your home too.
And you sure wouldn't want to be worrying about excessive exposure to UV rays every time you step out of the house because of the huge hole in the ozone layer.
Serene Lim
Labels: climate change, deforestation
It's beginning to trade a lot like Christmas
You can always tell Christmas is on its way when volumes on the market start to dip. In previous weeks, we saw volumes of 1-2 bln in the morning session alone, even before traders headed off for makan. In recent days, volumes have started to fall with just a few hundred million shares traded by lunchtime, and daily totals falling short of even the 1.5 bln mark. But this is precisely the time to be extra vigilant.
Wednesday's trade on the Singapore equities market totalled 1.45 bln shares worth S$1.73 bln. Previous days in December looked little different. This despite the heavy going on US markets, with gut-wrenching declines one day, followed by soaring gains the next. If there is any heart we can take from the falling market (down around 80 points over the last two days, at time of writing), it is that it is falling on low volumes. We are not seeing a huge rush for the exit.
But before you think the market is going to go slowly and quietly to sleep, be reminded that the Christmas New Year break is precisely the time companies with bad news to announce are waiting for. They can meet their continuous disclosure obligations by announcing the news to the market, comforted in the knowledge that many traders and investors are either already in party mood or on holiday, or too drunk on eggnog and mulled wine to notice.
Fact is, the Christmas New Year's break is especially exciting because of the various profit warnings, deals-gone-sour and other shareprice-destroying news that will likely be put out there. Picture investor relations executives, grimacing as they click 'submit' on the announcement to SGXNet at 2am on Christmas Day.
Investors and traders returning from the holiday break in early January would do well to read our wrap of "What you missed over Christmas", and punish those companies shrewd enough to take advantage of the special time of the year in this way by selling them down doubly hard.
Mark Laudi
Wednesday's trade on the Singapore equities market totalled 1.45 bln shares worth S$1.73 bln. Previous days in December looked little different. This despite the heavy going on US markets, with gut-wrenching declines one day, followed by soaring gains the next. If there is any heart we can take from the falling market (down around 80 points over the last two days, at time of writing), it is that it is falling on low volumes. We are not seeing a huge rush for the exit.
But before you think the market is going to go slowly and quietly to sleep, be reminded that the Christmas New Year break is precisely the time companies with bad news to announce are waiting for. They can meet their continuous disclosure obligations by announcing the news to the market, comforted in the knowledge that many traders and investors are either already in party mood or on holiday, or too drunk on eggnog and mulled wine to notice.
Fact is, the Christmas New Year's break is especially exciting because of the various profit warnings, deals-gone-sour and other shareprice-destroying news that will likely be put out there. Picture investor relations executives, grimacing as they click 'submit' on the announcement to SGXNet at 2am on Christmas Day.
Investors and traders returning from the holiday break in early January would do well to read our wrap of "What you missed over Christmas", and punish those companies shrewd enough to take advantage of the special time of the year in this way by selling them down doubly hard.
Mark Laudi
Labels: Christmas, New Year, profit warnings, SGXNet, volumes
Futures: A lack of market maturity
OngFirst is currently running a campaign to encourage more Singapore investors to trade futures. It appears there is only a handful of people interested in this asset class at the moment. Perhaps it is perceived as risky, or too complex, and is keeping investors away. But given how the warrants market has taken off, I can't see any reason why the futures market shouldn't, either.
Disclosure: we are providing editorial and presentation services to the campaign, and so we have an economic interest to see it succeed. But for what it's worth, and at risk of sounding like an advertisement, here is our honest and objective take on what our experience has taught us about futures.
As Christie Loh said in the Today newspaper last week, the Singapore market needs to mature, and finding out what it's all about is part of that.
Mark Laudi
ArchivesDisclosure: we are providing editorial and presentation services to the campaign, and so we have an economic interest to see it succeed. But for what it's worth, and at risk of sounding like an advertisement, here is our honest and objective take on what our experience has taught us about futures.
1. All investments are risky – what is important is how to manage that risk, and whether the reward is commensurate.This is by no means intended as a recommendation to trade futures. It's up to each individual investor to decide what's right for them. But it's an interesting exercise just reading up on various asset classes beyond what you're used to.
2. There are strategies to mitigate risk – having a broker you trust to look after your futures contracts is a good idea.
3. Futures losses don't mount up – that's because your account is debited or credited at the end of each trading day, depending on whether the value of your futures contract has gone up or down.
4. Eliminate company risk – buying shares in an oil company is one way to get exposure to the oil price, but it won't matter what the oil price does if the company is managed badly. Futures track commodities directly, minus company risk.
5. Exposure to commodities – there is an Exchange Traded Fund listed on the SGX on commodities, but it gives you exposure to about 20 commodities, not any one in particular. Futures give you exposure to many different types of commodities individually.
As Christie Loh said in the Today newspaper last week, the Singapore market needs to mature, and finding out what it's all about is part of that.
Mark Laudi
Labels: commodities, Futures, OngFirst
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