SGX-Bursa link: do we really need it?
I have been a strong advocate of the trading link between the Singapore Exchange and Bursa Malaysia because it brings the two countries closer together, it fosters economic cooperation and it will likely add liquidity to both markets. It is heartening to read that they're finally getting it together. But while I hold firm to these points, it is merely stating the obvious that the trading link has been delayed so often that retail investors could be forgiven for thinking it will never happen. And now one wonders whether it actually should.
The fact is, Singaporeans can already trade on Bursa Malaysia using established brokers and networks (watch the video to find out which ones). Trading commissions may be higher, but it is unclear whether fees would come down when there is an electronic linkage between the exchanges. Presumably, the exchanges would justifiably seek some return on the extra infrastructure needed to establish the linkage.
The real issue is not so much the technology involved, although the long delays and integration of the technology have been frustrating enough. It's an issue of marketing. Our own Investor Central research has often found that investors - particularly at the retail end - much prefer to invest in the markets in which they live. That is as true of Singaporeans, as it is of Malaysians, Thais and the Chinese. It makes perfect sense: they like to buy stocks they are most familiar with.
Incidentally, the second highest preference of investors in these markets is the US market. Which also makes sense, given the prominence of US companies in the news.
If the SGX-Bursa link is to work, it will be more about achieving a familiarity with companies in each other's markets. It was this lack of familiarity, in the absence of a decent marketing campaign, lead to the demise of the SGX-ASX WorldLink in 2006.
Another issue, which hasn't been dealt with publicly, is the political aspect (watch the video to hear Mark's views on this). So, given all the technical and political difficulties that may arise out of a formal trading link, it may be wiser to focus a marketing campaign on the services which are already available in the market.
Mark Laudi, who is a particular fan of the Malaysian equities market because of the complementary investment opportunities it offers.
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website! for free SMS alerts to news about stocks in your watchlist
The fact is, Singaporeans can already trade on Bursa Malaysia using established brokers and networks (watch the video to find out which ones). Trading commissions may be higher, but it is unclear whether fees would come down when there is an electronic linkage between the exchanges. Presumably, the exchanges would justifiably seek some return on the extra infrastructure needed to establish the linkage.
The real issue is not so much the technology involved, although the long delays and integration of the technology have been frustrating enough. It's an issue of marketing. Our own Investor Central research has often found that investors - particularly at the retail end - much prefer to invest in the markets in which they live. That is as true of Singaporeans, as it is of Malaysians, Thais and the Chinese. It makes perfect sense: they like to buy stocks they are most familiar with.
Incidentally, the second highest preference of investors in these markets is the US market. Which also makes sense, given the prominence of US companies in the news.
If the SGX-Bursa link is to work, it will be more about achieving a familiarity with companies in each other's markets. It was this lack of familiarity, in the absence of a decent marketing campaign, lead to the demise of the SGX-ASX WorldLink in 2006.
Another issue, which hasn't been dealt with publicly, is the political aspect (watch the video to hear Mark's views on this). So, given all the technical and political difficulties that may arise out of a formal trading link, it may be wiser to focus a marketing campaign on the services which are already available in the market.
Mark Laudi, who is a particular fan of the Malaysian equities market because of the complementary investment opportunities it offers.
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Labels: Bursa Malaysia, SGX, Singapore Exchange, trading link
Starbucks: What it shows about Singapore & Malaysia
Starbucks may be a global franchise, but the difference between Starbucks in Singapore and in Malaysia is an interesting microcosm of the competitive nature of the two countries. In short, I get the sense increasingly that Singaporeans have no room for complacency. If the experience at Starbucks in Malaysia is anything to go by, we'd better pull our socks up.
Next time you're in Kuala Lumpur, go to Starbucks with your laptop and try to plug in your power cord. You'll be pleasantly surprised. Not only will your little green "power" light come on. The cafe even supplies an extension cord with a multiple adaptor to make it easier for several customers to plug in at once (if there is a café in Singapore that offers the same customer service, please let me know!)
I remarked about this phenomenon to a Malaysian friend, and offered a comparison with cafes in Singapore (not necessarily Starbucks). Here, the wall sockets are usually switched off to ensure customers who dare to plug in don't draw on the store's electricity. The staff flick the fuse on only long enough to to zip around the store with the vaccuum cleaner, before flicking it off again. Further, the staff often frown at you if you do find a wall plug that gives you power to your laptop. Or scold you outright for contributing to the electricity bill.
My Malaysian friend said: the folks in Singapore are smarter!
This brings me to the crux of the issue. Sure enough, the Singapore store owners may be smarter to save electricity. But this attitude is penny-wise, pound-foolish. The Malaysian store owners have realised that even though their electricity bills may be higher, customers will sit - and consume drink after drink - if they are able to keep their laptops powered on (laptops actually don't draw a lot of power compared to, say, the store's hotwater heater, cappuccino maker or toaster). They take a longer term view and, in my opinion, not just keep existing customers drinking more beverages, but keep them coming back.
So while Singaporeans may be smarter to keep costs down, the Malaysians are more business savy to take higher electricity costs into account in order to attract and retain customers.
I must confess: I am well and truly on the Singapore side of the argument when it comes to CIQ, railway land, access to treated water, sea boundaries and many of the other arguments the two countries have from time to time. But having traveled to Malaysia practically every month since October 2006 my view has changed somewhat. Previously I was impressed with the efficiency of the Singapore system. Having now dealt extensively with Malaysians I am finding they are hungrier, think out of the box more readily, and are quicker to make decisions. They are willing to make short-term concessions for long-term benefit.
For investors, the implications are potentially that:
1. Malaysian companies are more innovative, and could become more profitable as a result than Singaporean companies
2. Bursa Malaysia is becoming more innovative, and could become tougher competition for international capital
These points should not be news to anyone. The government has been telling us this for a long time. But it really gets you thinking when you experience it yourself.
Mark Laudi, who is among probably a small group of ang mohs who knows all the words to "Majulah Singapura".
To comment on this blog, go to the Investor Central blog.
Next time you're in Kuala Lumpur, go to Starbucks with your laptop and try to plug in your power cord. You'll be pleasantly surprised. Not only will your little green "power" light come on. The cafe even supplies an extension cord with a multiple adaptor to make it easier for several customers to plug in at once (if there is a café in Singapore that offers the same customer service, please let me know!)
I remarked about this phenomenon to a Malaysian friend, and offered a comparison with cafes in Singapore (not necessarily Starbucks). Here, the wall sockets are usually switched off to ensure customers who dare to plug in don't draw on the store's electricity. The staff flick the fuse on only long enough to to zip around the store with the vaccuum cleaner, before flicking it off again. Further, the staff often frown at you if you do find a wall plug that gives you power to your laptop. Or scold you outright for contributing to the electricity bill.
My Malaysian friend said: the folks in Singapore are smarter!
This brings me to the crux of the issue. Sure enough, the Singapore store owners may be smarter to save electricity. But this attitude is penny-wise, pound-foolish. The Malaysian store owners have realised that even though their electricity bills may be higher, customers will sit - and consume drink after drink - if they are able to keep their laptops powered on (laptops actually don't draw a lot of power compared to, say, the store's hotwater heater, cappuccino maker or toaster). They take a longer term view and, in my opinion, not just keep existing customers drinking more beverages, but keep them coming back.
So while Singaporeans may be smarter to keep costs down, the Malaysians are more business savy to take higher electricity costs into account in order to attract and retain customers.
I must confess: I am well and truly on the Singapore side of the argument when it comes to CIQ, railway land, access to treated water, sea boundaries and many of the other arguments the two countries have from time to time. But having traveled to Malaysia practically every month since October 2006 my view has changed somewhat. Previously I was impressed with the efficiency of the Singapore system. Having now dealt extensively with Malaysians I am finding they are hungrier, think out of the box more readily, and are quicker to make decisions. They are willing to make short-term concessions for long-term benefit.
For investors, the implications are potentially that:
1. Malaysian companies are more innovative, and could become more profitable as a result than Singaporean companies
2. Bursa Malaysia is becoming more innovative, and could become tougher competition for international capital
These points should not be news to anyone. The government has been telling us this for a long time. But it really gets you thinking when you experience it yourself.
Mark Laudi, who is among probably a small group of ang mohs who knows all the words to "Majulah Singapura".
To comment on this blog, go to the Investor Central blog.
Labels: Bursa Malaysia, Singapore Exchange, Starbucks
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.
ArchivesShortening 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
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