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
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
ArchivesWednesday'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
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