Algorithmic trading on the SGX: less clarity, more volatility
I'm never one to say things have to stay the same when new technology comes along. Resisting change is generally futile. That's particularly the case if new revenue streams can be earnt. But the Singapore Exchange's announcement of a partnership with SingTel to cut the processing time of trades to less than a millisecond from the current, oh-so-slow 4 milliseconds deserves further investigation. As always, whenever the exchange makes changes, there are winners and losers. In this case it appears the exchange is the winner, traders might be winners if they play their cards right, and investors are losers.
The point of the cut in the time it takes to consummate a trade from miniscule to even more miniscule is to allow traders to employ algorithmic programs. It's also called automated trading or program trading. It's when computers take over the job of brokers. There are some excellent articles around on this subject, such as this one from BusinessWeek a few years ago. The area of automated trading is an industry unto itself. There is even a magazine and a podcast on the subject.
Suffice to say, algorithmic trading will create:
1. Greater secrecy. It'll be harder to find out who's moving large positions because this will be done incrementally, and
2. Greater volatility. A third of all EU and US stock trades in 2006 were driven by automatic programs, according to this article on Wikipedia. That is, driven not by fundamentals but by technical trading.
It'll "enhance SGX's market liquidity and depth" alright. But I can't see how either of them will be good for investors. Recall, investors are those poor souls who buy stocks for what they're actually for: Dividend payouts and capital appreciation. There is already enough noise around to distract us from this. The last thing we need is to be tossed around by ever growing storms of volatility, and a decreased understanding of who is buying or selling what.
As I said, I am loath to critique new technology on the basis of resistance to change. It just means that investors will have to keep getting smarter. And not just investors. As Futures & Options Week points out, the increase in automated trading "presents a challenge to clearing operations" because lightning fast trades require lightning fast clearing. Let's hope the SGX is also geared up for that.
Mark Laudi, who fears the Singapore Exchange will become evermore Singapore's third casino.
To comment on this blog, go to the Investor Central blog.
Visit the brand new Investor Central website! for FREE SMS alerts to news about stocks in your watchlist.
The point of the cut in the time it takes to consummate a trade from miniscule to even more miniscule is to allow traders to employ algorithmic programs. It's also called automated trading or program trading. It's when computers take over the job of brokers. There are some excellent articles around on this subject, such as this one from BusinessWeek a few years ago. The area of automated trading is an industry unto itself. There is even a magazine and a podcast on the subject.
Suffice to say, algorithmic trading will create:
1. Greater secrecy. It'll be harder to find out who's moving large positions because this will be done incrementally, and
2. Greater volatility. A third of all EU and US stock trades in 2006 were driven by automatic programs, according to this article on Wikipedia. That is, driven not by fundamentals but by technical trading.
It'll "enhance SGX's market liquidity and depth" alright. But I can't see how either of them will be good for investors. Recall, investors are those poor souls who buy stocks for what they're actually for: Dividend payouts and capital appreciation. There is already enough noise around to distract us from this. The last thing we need is to be tossed around by ever growing storms of volatility, and a decreased understanding of who is buying or selling what.
As I said, I am loath to critique new technology on the basis of resistance to change. It just means that investors will have to keep getting smarter. And not just investors. As Futures & Options Week points out, the increase in automated trading "presents a challenge to clearing operations" because lightning fast trades require lightning fast clearing. Let's hope the SGX is also geared up for that.
Mark Laudi, who fears the Singapore Exchange will become evermore Singapore's third casino.
To comment on this blog, go to the Investor Central blog.
Visit the brand new Investor Central website! for FREE SMS alerts to news about stocks in your watchlist.
Labels: algorithmic trading, automated trading, program trading, Proximity Hosting Services, SGX, Singapore Exchange, SingTel
Press Releases <> Significant Announcements
It has long been a bugbear of mine that some PR companies stretch significant announcements of their clients over three days to try to get some media coverage. But another issue that yanks our collective chain is their use of the SGX Significant Announcements website as their corporate press release dissemination channel. Creative Technology stands out as one of the main 'offenders'.
Today's announcement is a case in point. If the announcement title 'Creative Introduces the Vado Pocket Video Cam - Capture Life - See it, Shoot it, Share it - All in an Instant' doesn't already give it away, the absence of any forecast on the impact on earnings - not even the obligatory but completely useless "this announcement is not likely to impact earnings this year" - is sure to make you see this press release for what it is.
We don't have anything personal against Creative's Corporate Communications Manager Jenny Wong, nor Yap Meng Lee from August Consulting, whose names grace the documents. In a way, I sympathise with Creative because of the tough ride they've been through. Wong and agency haven't exactly had a lot of good news to announce over the last year or five. But the SGX significant announcements page just isn't the place if the announcement is not significant.
Plus it's not like these postings have their desired effect. A scan over the last three months worth of announcements show that out of the nine announcements in that time, four were product press releases (the others were meaningful announcements about the sale and leaseback of their building, financial results and a tie-up with InnoMedia). A check on Google shows none of these four were picked up by the press.
This is where the Investor Relations Professionals Association (Singapore) – set up with the blessing of the SGX – can have an influence. If it wants to do something really useful, it would ask the SGX to split the current corporate announcements page into two: one for the really meaningful stuff which serious investors need to make investment decisions, and another for all the rest. This would include glossy PowerPoint presentations, press releases and so on, which are not permitted to say anything more than the statutory announcement anyway (and usually say a whole lot less). I suspect the IRPAS would not agitate for such a change, given that the Association's Board of Directors is made up entirely of investor relations people (or in any event corporate types who stand to benefit from putting a message out there), not the audience of investors and analysts who are at the receiving end of their output.
For the sake of clarity and an informed (not clouded) market, let's get rid of the PR stuff and cut to the real game on the SGX announcements page.
Mark Laudi
Today's announcement is a case in point. If the announcement title 'Creative Introduces the Vado Pocket Video Cam - Capture Life - See it, Shoot it, Share it - All in an Instant' doesn't already give it away, the absence of any forecast on the impact on earnings - not even the obligatory but completely useless "this announcement is not likely to impact earnings this year" - is sure to make you see this press release for what it is.
We don't have anything personal against Creative's Corporate Communications Manager Jenny Wong, nor Yap Meng Lee from August Consulting, whose names grace the documents. In a way, I sympathise with Creative because of the tough ride they've been through. Wong and agency haven't exactly had a lot of good news to announce over the last year or five. But the SGX significant announcements page just isn't the place if the announcement is not significant.
Plus it's not like these postings have their desired effect. A scan over the last three months worth of announcements show that out of the nine announcements in that time, four were product press releases (the others were meaningful announcements about the sale and leaseback of their building, financial results and a tie-up with InnoMedia). A check on Google shows none of these four were picked up by the press.
This is where the Investor Relations Professionals Association (Singapore) – set up with the blessing of the SGX – can have an influence. If it wants to do something really useful, it would ask the SGX to split the current corporate announcements page into two: one for the really meaningful stuff which serious investors need to make investment decisions, and another for all the rest. This would include glossy PowerPoint presentations, press releases and so on, which are not permitted to say anything more than the statutory announcement anyway (and usually say a whole lot less). I suspect the IRPAS would not agitate for such a change, given that the Association's Board of Directors is made up entirely of investor relations people (or in any event corporate types who stand to benefit from putting a message out there), not the audience of investors and analysts who are at the receiving end of their output.
For the sake of clarity and an informed (not clouded) market, let's get rid of the PR stuff and cut to the real game on the SGX announcements page.
Mark Laudi
Labels: Creative Technology, Investor Relations Professionals Association (Singapore), IRPAS, Singapore Exchange
Henry Paulson's plan to reduce the SGX's attractiveness
The US Treasury Secretary's plan to develop new laws for the financial services industry there may be long overdue. The Securities Act dates back to 1933, and while there have been many additional laws put into place sometimes it's just better to start anew. I don't want to debate the merits of Henry Paulson's plan here. But a perhaps unintended consequence may well be that smaller markets outside of the US, which have been positioning themselves as attractive bourses to list, will be under pressure.
Let's face it. We all love the Sarbanes-Oxley Act. Not because it straightens out shrewd American executives. It might do that, I'm not entirely sure. We love it because it makes the US such a damn difficult place to maintain a listing that even reputable companies are looking elsewhere to go public. According to figures produced by Harvard Law Professor and head of the Committee on Capital Markets Regulation, Hal Scott (quoted in USA Today), the US has been losing its attractiveness big time. In 1996, he says, eight of the 20 largest global initial public offerings were listed on a US exchange. In 2006, it was only one. Up till December 2007, not one of the top 20 global IPOs listed in the US. Similarly, 56 foreign companies abandoned their US listing in the first ten months of 2007, compared to 30 for all of 2006. Among them: Creative Technology and Australia's ANZ Bank.
Bad for them, good for us. Because it inevitably means markets such as the London Alternative Investment Market (AIM), as well as Hong Kong and Singapore, are more attractive listing destinations.
I'm not terribly concerned with the angst US exchanges may have over the prospect of equities and futures markets merging. This is already de rigueur in Asia. Just look at the merger between Singapore Exchange and Singapore International Monetary Exchange (SiMEX) in 2000 (!), and the merger between the Australian Stock Exchange and Sydney Futures Exchange to form the Australian Securities Exchange in December 2006. It's time those mile-driving, gallon-drinking and ounces-weighing Americans get over it and join the 21st century (maybe they'll consider switching to metric in the process).
My greater concern is that the United States already attracts a huge amount of capital, not because they're experts at handling money (for those that think they are, I have two words for you: sub-prime), but because of their sheer size. The statistics from the World Federation of Exchanges (page 33) bear this out. The US financial market has the inertia of a supertanker, even if it's a rusty one.
By contrast, the Singapore Exchange is a tugboat. If the supertanker modernises and becomes more agile, it is my hope that the SGX won't capsize in the wash.
Your thoughts?
Mark Laudi, who thinks it's quaint that the NYSE ditched fractions in favour of decimal calculations less than a decade ago.
To comment on this blog, go to the Investor Central blog.
Visit the brand new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Let's face it. We all love the Sarbanes-Oxley Act. Not because it straightens out shrewd American executives. It might do that, I'm not entirely sure. We love it because it makes the US such a damn difficult place to maintain a listing that even reputable companies are looking elsewhere to go public. According to figures produced by Harvard Law Professor and head of the Committee on Capital Markets Regulation, Hal Scott (quoted in USA Today), the US has been losing its attractiveness big time. In 1996, he says, eight of the 20 largest global initial public offerings were listed on a US exchange. In 2006, it was only one. Up till December 2007, not one of the top 20 global IPOs listed in the US. Similarly, 56 foreign companies abandoned their US listing in the first ten months of 2007, compared to 30 for all of 2006. Among them: Creative Technology and Australia's ANZ Bank.
Bad for them, good for us. Because it inevitably means markets such as the London Alternative Investment Market (AIM), as well as Hong Kong and Singapore, are more attractive listing destinations.
I'm not terribly concerned with the angst US exchanges may have over the prospect of equities and futures markets merging. This is already de rigueur in Asia. Just look at the merger between Singapore Exchange and Singapore International Monetary Exchange (SiMEX) in 2000 (!), and the merger between the Australian Stock Exchange and Sydney Futures Exchange to form the Australian Securities Exchange in December 2006. It's time those mile-driving, gallon-drinking and ounces-weighing Americans get over it and join the 21st century (maybe they'll consider switching to metric in the process).
My greater concern is that the United States already attracts a huge amount of capital, not because they're experts at handling money (for those that think they are, I have two words for you: sub-prime), but because of their sheer size. The statistics from the World Federation of Exchanges (page 33) bear this out. The US financial market has the inertia of a supertanker, even if it's a rusty one.
By contrast, the Singapore Exchange is a tugboat. If the supertanker modernises and becomes more agile, it is my hope that the SGX won't capsize in the wash.
Your thoughts?
Mark Laudi, who thinks it's quaint that the NYSE ditched fractions in favour of decimal calculations less than a decade ago.
To comment on this blog, go to the Investor Central blog.
Visit the brand new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Labels: AIM, Henry Paulson, NYSE, Singapore Exchange
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
The SGX's "Watch-List": Complete duds or hidden value?
The Singapore Exchange is to be applauded for trying to raise the standard of mainboard listed companies, but generating a list of those which fail to meet minimum standards. Companies which have reported consoliated pre-tax losses for the prior three years can find themselves on this list. If they don't improve, they could find their shares suspended or even delisted. But while the motivation is laudable, the criteria used to judge companies could be debated.
Right up front: this is not a recommendation to buy any shares, nor am I going into bat for these companies. Not least, because they didn't acknowledge their "spoon award" beyond the necessary disclosure, and explain how they were working to make sure they weren't on the list again in the future.
But I'm concerned the SGX is using a profit number, rather than cashflow, as the category to measure companies by (loss-making companies must also have a market capitalisation of S$40 mln or more to escape being named). As we all know, "profit is opinion, cash is fact". And because profit numbers can be affected by property revaluations and other arbitrary, non-cash measures, CFOs of the affected companies can find ways to escape being listed.
If we then look at cashflow instead of profits, five of the eight companies named on the first list could perhaps we cut some slack.
Watch the video to see what I mean.
Fact is: none of these companies are stellar performers. But if the list was compiled based on cashflow, not only would we quite likely see a very different list, we would also ensure that CFOs had no way to cook the books to get their way out of trouble.
Mark Laudi, who thinks this would have been a good opportunity to convert investors from focusing on profit to focusing on cashflow.
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
Right up front: this is not a recommendation to buy any shares, nor am I going into bat for these companies. Not least, because they didn't acknowledge their "spoon award" beyond the necessary disclosure, and explain how they were working to make sure they weren't on the list again in the future.
But I'm concerned the SGX is using a profit number, rather than cashflow, as the category to measure companies by (loss-making companies must also have a market capitalisation of S$40 mln or more to escape being named). As we all know, "profit is opinion, cash is fact". And because profit numbers can be affected by property revaluations and other arbitrary, non-cash measures, CFOs of the affected companies can find ways to escape being listed.
If we then look at cashflow instead of profits, five of the eight companies named on the first list could perhaps we cut some slack.
Watch the video to see what I mean.
Fact is: none of these companies are stellar performers. But if the list was compiled based on cashflow, not only would we quite likely see a very different list, we would also ensure that CFOs had no way to cook the books to get their way out of trouble.
Mark Laudi, who thinks this would have been a good opportunity to convert investors from focusing on profit to focusing on cashflow.
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: ASA Group, Chuan Soon Huat, Fastech Synergy, SGX, Singapore Exchange, Tri-M Technology, Unified Communications
SGX's review of fines: our contribution
We are delighted the Singapore Exchange is inviting comment on penalties for companies which flout exchange rules. Our own list of what actions should be classified as misdemeanours is not terribly scientific, but it is based on the common gripes retail shareholders voice about the stockmarket.
1. Perceptions of insider trading. We are not making any specific allegations, nor are we saying the SGX hasn't been doing a good enough job on enforcement. But I'm fed up to the teeth with stocks which have an out-of-the-ordinary day on the market, but the market-moving announcement doesn't come until after the market closes. And no one is held accountable for it. Fortunately, this doesn't happen often. But it happens often enough for us to roll our eyes, groan, and curse the fact that we're just retail investors who are left out in the cold.
2. Barring unforeseen circumstances… According to the template companies must complete when announcing earnings, they have to give an outlook:
Come on, if that's truly the depth of insight management has into the future of the company they're probably not worth investing in (from the crop of earnings stories tonight, kudos to Baker Tech, MAP Technology, Natural Cool and Showy International among others for being significantly more detailed in their statements, even if they had negative news to announce).
3. Press releases that only tell half the story. Listed companies probably know all too well that too many so-called business journalists just re-write press releases for a living. Hence, they often leave out the juicy bits from the press release and leave it to the statutory announcements, which fewer people read. We would promote a "truth-in press releases" goal. In the meantime, we would encourage shareholders to shun companies which don't have the courage to deal candidly and honestly with bad news in press releases, and we would encourage readers and viewers to shun journalists who don't read the statutory announcements and only re-write the press release.
What are your bug-bears?
Mark Laudi, who could rave all night about these issues.
To comment on this blog, go to the Investor Central blog.
1. Perceptions of insider trading. We are not making any specific allegations, nor are we saying the SGX hasn't been doing a good enough job on enforcement. But I'm fed up to the teeth with stocks which have an out-of-the-ordinary day on the market, but the market-moving announcement doesn't come until after the market closes. And no one is held accountable for it. Fortunately, this doesn't happen often. But it happens often enough for us to roll our eyes, groan, and curse the fact that we're just retail investors who are left out in the cold.
2. Barring unforeseen circumstances… According to the template companies must complete when announcing earnings, they have to give an outlook:
A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months.We wish fines upon companies which merely write:
Barring any unforeseen circumstances, the Directors of the Company expect the Group to be profitable for FY2008.This may be a statement of fact and meet the requirements, but it is nowhere near sufficient to contribute meaningfully to an investment decision. It's like saying, "unless something happens to us, we expect to still be around next year".
Come on, if that's truly the depth of insight management has into the future of the company they're probably not worth investing in (from the crop of earnings stories tonight, kudos to Baker Tech, MAP Technology, Natural Cool and Showy International among others for being significantly more detailed in their statements, even if they had negative news to announce).
3. Press releases that only tell half the story. Listed companies probably know all too well that too many so-called business journalists just re-write press releases for a living. Hence, they often leave out the juicy bits from the press release and leave it to the statutory announcements, which fewer people read. We would promote a "truth-in press releases" goal. In the meantime, we would encourage shareholders to shun companies which don't have the courage to deal candidly and honestly with bad news in press releases, and we would encourage readers and viewers to shun journalists who don't read the statutory announcements and only re-write the press release.
What are your bug-bears?
Mark Laudi, who could rave all night about these issues.
To comment on this blog, go to the Investor Central blog.
Labels: barring unforeseen circumstances, earnings statements, fines, insider trading, outlook, SGX, Singapore Exchange
SGX.com: a better gauge of future earnings?
Here is an interesting if unorthodox way of forecasting future earnings of the Singapore Exchange Limited. While most financial analysts focus their attention on trading volumes and the market outlook, you might like to ask the SGX's customers: investors and traders. And, it seems, they are voting with their feet.
Tens of thousands of people visit the SGX website each day for price data and information about companies. It is hugely popular (and largely not monetised). But when you look at the number of people visiting the SGX website, you see some startling results. This chart illustrates that interest is much lower now than in recent years. In fact, it's falling off a cliff.
Given the volatility in the market and concerns about recession it's perhaps not surprising that investors are staying on the sidelines. My concern is, they're not just staying on the sidelines. They're not even watching the game!
Measuring web traffic is unorthodox, as I've said. It is also unscientific. The chart doesn't show absolute numbers of visitors. It just shows the percentage of visitors to their website, compared to total internet traffic. Conceivably, the reason why the SGX website garners a lower percentage of total web traffic is that there are many more people who've logged on but are visiting other websites. But even this would indicate that while interest in other areas of the internet is growing, not so the SGX website.
But just as economists count employment ads and pages of advertisements in newspapers to gain a pulse-check on that country's economy, perhaps financial analysts would do well to track website visits as well as the usual round of financial information.
Mark Laudi, who is still watching the game, very closely
To comment on this blog, go to the Investor Central blog.
Tens of thousands of people visit the SGX website each day for price data and information about companies. It is hugely popular (and largely not monetised). But when you look at the number of people visiting the SGX website, you see some startling results. This chart illustrates that interest is much lower now than in recent years. In fact, it's falling off a cliff.
Given the volatility in the market and concerns about recession it's perhaps not surprising that investors are staying on the sidelines. My concern is, they're not just staying on the sidelines. They're not even watching the game!
Measuring web traffic is unorthodox, as I've said. It is also unscientific. The chart doesn't show absolute numbers of visitors. It just shows the percentage of visitors to their website, compared to total internet traffic. Conceivably, the reason why the SGX website garners a lower percentage of total web traffic is that there are many more people who've logged on but are visiting other websites. But even this would indicate that while interest in other areas of the internet is growing, not so the SGX website.
But just as economists count employment ads and pages of advertisements in newspapers to gain a pulse-check on that country's economy, perhaps financial analysts would do well to track website visits as well as the usual round of financial information.
Mark Laudi, who is still watching the game, very closely
To comment on this blog, go to the Investor Central blog.
Labels: Alexa, SGX, Singapore Exchange
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
FTSE Index data: Just display it!
Stockbrokers have resisted displaying live FTSE ST Indices on their screens because of the charges that they are charged for the data. They argue they don't want to pay extra, even though they won't be charged for the first year (they secured the first-year-free concession after earlier protests). But FTSE says it costs money to compile the indices on a daily basis. Our view is that the whole debate is rather childish and the losers, once again, are retail investors.
Stockbrokers have gone through a rough ride in recent years. First the deregulation of commissions brought prices down to S$25 per online trade, S$40 per broker-assisted trade over the phone, or alternatively 0.275% or 0.28% for large trades. Previously, they got paid much more. We saw a significant round of consolidation in 1999 and 2000, which brought about, among others, the combination of Vickers Ballas and DBS to form DBS Vickers, KayHian and UOB to form UOB KayHian, and so on. For brokers who've already seen their commissions drop, any additional cost is borne by them, and not passed on to clients. They absorb extra costs because of the competition in the market, and because retail investors are generally unwilling to pay.
The irony is, the brokers are behaving just the same. Even as they complain that they have no pricing power, that retail investors generally are cheapskates who complain about "high" brokerage commissions and demand that "everything also must be free", they are asking FTSE and the SGX to do the same.
It would be much better for everyone - including retail investors - to comprehend the value of data and information. Without these, no one would be doing any trades. Data and information are not luxury add-ons. They are crucial to the whole trading process. It's like refusing to fuel up your car to spite the oil companies and high oil prices. But your car won't go anywhere!
My understanding is ShareInvestor.com has a separate data charge for its subscribers, much like airlines have a fuel surcharge separate to the price of airline tickets. Perhaps the brokers should consider this? After all, currently they look like the bad boys in this dispute. If they provided the service but passed on the cost - in a year from now, when the charges kick in - they pass the responsibility of the costs to the SGX. By then, retail investors will be so used to seeing the indices, they won't be able to do without them and this whole issue becomes mute.
Mark Laudi - who favours the FTSE ST All Share Index as the new benchmark
To comment on this blog, go to the Investor Central blog
Stockbrokers have gone through a rough ride in recent years. First the deregulation of commissions brought prices down to S$25 per online trade, S$40 per broker-assisted trade over the phone, or alternatively 0.275% or 0.28% for large trades. Previously, they got paid much more. We saw a significant round of consolidation in 1999 and 2000, which brought about, among others, the combination of Vickers Ballas and DBS to form DBS Vickers, KayHian and UOB to form UOB KayHian, and so on. For brokers who've already seen their commissions drop, any additional cost is borne by them, and not passed on to clients. They absorb extra costs because of the competition in the market, and because retail investors are generally unwilling to pay.
The irony is, the brokers are behaving just the same. Even as they complain that they have no pricing power, that retail investors generally are cheapskates who complain about "high" brokerage commissions and demand that "everything also must be free", they are asking FTSE and the SGX to do the same.
It would be much better for everyone - including retail investors - to comprehend the value of data and information. Without these, no one would be doing any trades. Data and information are not luxury add-ons. They are crucial to the whole trading process. It's like refusing to fuel up your car to spite the oil companies and high oil prices. But your car won't go anywhere!
My understanding is ShareInvestor.com has a separate data charge for its subscribers, much like airlines have a fuel surcharge separate to the price of airline tickets. Perhaps the brokers should consider this? After all, currently they look like the bad boys in this dispute. If they provided the service but passed on the cost - in a year from now, when the charges kick in - they pass the responsibility of the costs to the SGX. By then, retail investors will be so used to seeing the indices, they won't be able to do without them and this whole issue becomes mute.
Mark Laudi - who favours the FTSE ST All Share Index as the new benchmark
To comment on this blog, go to the Investor Central blog
Labels: DBS Vickers, FTSE ST, retail investors, SGX, ShareInvestor.com, Singapore Exchange, UOB KayHian
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
SGX: Expands Into Philippines - But What For?
The deal the Singapore Exchange signed to take a 20% stake in the Philippine Dealing System Holdings Corp would be interesting, if it wasn't so small, and the derivatives market in the Philippines wasn't so poorly developed. I'm all for the SGX regionalising, but one wonders what the dividends of this deal will be.
The statement by the SGX says:
The wording of the news release is also interesting: "…it has agreed in-principle to accept the offer…" In other words, PDS approached the SGX. Therefore, PDS probably has more to gain from the deal, possibly in terms of the expertise shared by SGX, etc.
The SGX clearly has to keep working to stay relevant, and deals such as this, although small, are an indication that they are doing this. Small companies can grow into bigger companies, as the SGX itself has done.
SGX CEO Hsieh Fu Hua said this morning:
But beyond the small nature of the deal, there is also the question as to who the target market is. The equities market consists of just 240 stocks worth US$93.8 bln – the smallest market in Asia except New Zealand and Colombo. There are many derivatives listed in Singapore covering equities listed in other markets. For Philippine stocks that are worth covering, wouldn't market makers in Singapore have exhausted the possibilities already? Is the domestic Philippine retail market ready for derivatives trading?
Questions which we either have to wait for the SGX – or time – to explain.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
The statement by the SGX says:
PDS operates a fixed-income exchange, depository and foreign exchange settlement platform. This proposed acquisition will provide SGX the opportunity to expand into a new geographical market and collaborate with PDS on derivatives products. SGX and PDS will also explore depository linkages to custodise securities in each other’s markets, on behalf of their account holders. The proposed collaboration will reinforce SGX’s Asian Gateway strategy and position.Perhaps, but it is difficult to see how a 20% stake worth just S$5 mln will do this. The Philippines doesn't rate a mention in the World Federation of Exchanges' most recent tabulation of fixed-income and derivatives turnover. Perhaps PDS isn't a member of the Federation.
The wording of the news release is also interesting: "…it has agreed in-principle to accept the offer…" In other words, PDS approached the SGX. Therefore, PDS probably has more to gain from the deal, possibly in terms of the expertise shared by SGX, etc.
The SGX clearly has to keep working to stay relevant, and deals such as this, although small, are an indication that they are doing this. Small companies can grow into bigger companies, as the SGX itself has done.
SGX CEO Hsieh Fu Hua said this morning:
Our proposed stake in PDS will be more than just a financial investment. It will give both parties the opportunity to collaborate on a wider suite of products in a fast-growing geographical market. SGX and PDS will also explore a depository linkage to custodise securities in each other’s markets on behalf of account holders. This proposed depository linkage fits in with the concept of post-trade alliances being a practical way of collaboration in Asia.He also said:
Einstein was said to have once defined insanity as doing the same thing over and over again but expecting different results each time. If we continue divided as we have been in the past, can we remain relevant in the years to come? This issue is especially pressing for the relatively smaller, disparate exchanges of ASEAN. To achieve a single and more significant marketplace, we propose that multilateral gateways in both trading and clearing be forged amongst the ASEAN exchanges.All these points a certainly valid.
But beyond the small nature of the deal, there is also the question as to who the target market is. The equities market consists of just 240 stocks worth US$93.8 bln – the smallest market in Asia except New Zealand and Colombo. There are many derivatives listed in Singapore covering equities listed in other markets. For Philippine stocks that are worth covering, wouldn't market makers in Singapore have exhausted the possibilities already? Is the domestic Philippine retail market ready for derivatives trading?
Questions which we either have to wait for the SGX – or time – to explain.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Labels: Philippines, Philippines Dealing And Exchange Corp, SGX, Singapore Exchange
How bad is BAD?
Amidst the earnings season and the likely increase in companies having share placements, how literally should investors take the company's word for it?
Earnings seasons comes once in three months --- for some, once in six months. Companies will then have to declare its revenue, profit numbers, cashflow, dividends and a few other pointers. It is the company's responsibility to inform shareholders about the liquidity of the company for that period.
They have a certain dateline and the information would have to be posted up on the Singapore Exchange, the one and only stock exchange moderator in Singapore. Companies who fail to meet the dateline would have to request and make a public announcement to post its earnings on another date.
But what really irks me is when companies keep postponing the date to release its earnings.
The companies of course, do have to state its reason for doing so. For example, like when new purchases took place and the numbers have not been added/audited into the earnings' statement, or that the latter date is a better reflection of the companies' performance.
Generally, investors do not really care! What they want is honesty from the companies where they put their money into, regardless if the numbers are good or bad. Be it the additional figures are added now or later, it would still be added anyway. The only difference would be the quarter in which that information is being added in.
Investors want to see the comparison between this quarter and the same time in the previous year, and some bluntness here might actually boost investors' confidence and belief in the company.
Share placement exercise is another pointer. While it does not happen all the time, I feel it is still worth pointing out and take note of such happenings.
Companies do share placement exercise to get more cash for the cash company. Essentially what it means is that the company is issuing more shares for more money. Of course, they will announce how much it expects to get and what it is going to use it for.
However there are times where companies, after it gets its proceeds from the share placement, it announces that instead of using it to invest in whatever they initially said the money is going for, it will be using the money for another thing.
An example is Alantac Technology where in August this year, after getting money from the proceeds, it says that it will 're-allocate' about S$5.0 mln to buy equipment in place of expanding its facilities. So investors who initially put in their money in hopes of facilitating the companies' expansion, are sort of 'being cheated' as it would in the end be used for another purpose.
These are just some examples. So really, how literally should investors take companies' word for it?
Comments? Bring it on!
Nurwidya Abdul
Earnings seasons comes once in three months --- for some, once in six months. Companies will then have to declare its revenue, profit numbers, cashflow, dividends and a few other pointers. It is the company's responsibility to inform shareholders about the liquidity of the company for that period.
They have a certain dateline and the information would have to be posted up on the Singapore Exchange, the one and only stock exchange moderator in Singapore. Companies who fail to meet the dateline would have to request and make a public announcement to post its earnings on another date.
But what really irks me is when companies keep postponing the date to release its earnings.
The companies of course, do have to state its reason for doing so. For example, like when new purchases took place and the numbers have not been added/audited into the earnings' statement, or that the latter date is a better reflection of the companies' performance.
Generally, investors do not really care! What they want is honesty from the companies where they put their money into, regardless if the numbers are good or bad. Be it the additional figures are added now or later, it would still be added anyway. The only difference would be the quarter in which that information is being added in.
Investors want to see the comparison between this quarter and the same time in the previous year, and some bluntness here might actually boost investors' confidence and belief in the company.
Share placement exercise is another pointer. While it does not happen all the time, I feel it is still worth pointing out and take note of such happenings.
Companies do share placement exercise to get more cash for the cash company. Essentially what it means is that the company is issuing more shares for more money. Of course, they will announce how much it expects to get and what it is going to use it for.
However there are times where companies, after it gets its proceeds from the share placement, it announces that instead of using it to invest in whatever they initially said the money is going for, it will be using the money for another thing.
An example is Alantac Technology where in August this year, after getting money from the proceeds, it says that it will 're-allocate' about S$5.0 mln to buy equipment in place of expanding its facilities. So investors who initially put in their money in hopes of facilitating the companies' expansion, are sort of 'being cheated' as it would in the end be used for another purpose.
These are just some examples. So really, how literally should investors take companies' word for it?
Comments? Bring it on!
Nurwidya Abdul
Labels: Alantac Technology, earnings season, nvestor Central, share placement, Singapore Exchange
Tiger Airways: A wolf in budget clothing
When Singapore Airlines CEO Chew Choon Seng told an AP reporter on the first commercial A380 flight to Sydney last week that Tiger Airways would be going public at some stage, I almost choked on a fur ball: A budget carrier going public sounds wacky. Afterall, budget carriers are low-margin operations by definition. Bring down the value provided to passengers so you can bring down the price. Just like banks which face so-called "margin compression" when interest rates are low, budget carriers have to operate in an industry which is not designed to generate huge profit. But I think there is more to it than that.
Chew's comments were as follows:
Clearly, budget carriers can be profitable. But cast your mind back to all the discussion about budget carriers when they first came about a few years ago. There was a lot of talk of quick attrition (which is exactly what happened to ValuAir), as they struggled to make money on small fares. They were seen as a necessary evil, as market-disrupting operators like AirAsia came onto the scene, which were going to eat away at the profits of the full-service carriers.
But what has actually happened? Singapore Airlines is more profitable than ever, and while clearly the airline industry has gone through tough times I don't hear about another Delta or United going to the wall. On the contrary! (Story continued below poll)
What this leads to is two possibilities:
1. Budget carriers are making slim margins, and the only reason the current owners would want to list them is to sell-away low-return investments, or
2. Budget carriers actually do very well, offering special fares long in advance and keeping fares which are close to the full-service carriers for near-term bookings.
Chew's further comment is telling:
But Chew's final comment is perplexing:
So the STI at or near records is not optimal?
Then when?!?!
Oil prices are above US$90 a barrel, sure, but they're unlikely to fall far, even if they do come down.
So again, if not now, when?
To comment on this blog, visit the Investor Central Blog.
Mark Laudi
Chew's comments were as follows:
Chew also said Tiger Airways, in which the Irish founders of Ryanair hold a stake, will eventually sell shares to the public.
"The plan for Tiger is to eventually go to the market. It will go to the market when conditions are right," he said.
Clearly, budget carriers can be profitable. But cast your mind back to all the discussion about budget carriers when they first came about a few years ago. There was a lot of talk of quick attrition (which is exactly what happened to ValuAir), as they struggled to make money on small fares. They were seen as a necessary evil, as market-disrupting operators like AirAsia came onto the scene, which were going to eat away at the profits of the full-service carriers.
But what has actually happened? Singapore Airlines is more profitable than ever, and while clearly the airline industry has gone through tough times I don't hear about another Delta or United going to the wall. On the contrary! (Story continued below poll)
What this leads to is two possibilities:
1. Budget carriers are making slim margins, and the only reason the current owners would want to list them is to sell-away low-return investments, or
2. Budget carriers actually do very well, offering special fares long in advance and keeping fares which are close to the full-service carriers for near-term bookings.
Chew's further comment is telling:
"Our Irish partners in Tiger are not exactly pressing for an IPO (initial public offering)."In other words, Tiger is actually earning a fabulous return. A wolf in budget clothing.
But Chew's final comment is perplexing:
"They want to go to the market when conditions are optimal and it's not right now."I see.
So the STI at or near records is not optimal?
Then when?!?!
Oil prices are above US$90 a barrel, sure, but they're unlikely to fall far, even if they do come down.
So again, if not now, when?
To comment on this blog, visit the Investor Central Blog.
Mark Laudi
Labels: budget carrier, public listing, Singapore Exchange, Tiger Airways
Uni-Asia: Why was it listed so cheaply?
The first thing that strikes you about Uni-Asia is not just the big fluctuations in its shareprice since listing August 17, but what now seems like an incredibly low price that it fetched during the listing process. It offered 65.4 mln shares at 55 cents, giving it a price-to-book ratio of just 1.06x, and a price-to-earnings ratio of 5.5x. When average volumes hit 36 mln, and the stock reached an intraday record of S$2.79, it was trading at a P/B ratio of around 4x, and a P/E ratio of around 22x.
Now, I'm not going to comment on the investigation by the Singapore Exchange into possible price manipulation, which was called for by 33 retail investors who had gone to see the Securities Investors Association (Singapore) about their concerns. I do not profess to have any knowledge of whether there was any price manipulation or not. The company has also said it also doesn't have any knowledge of what caused the price to fluctuate so much.
But it sure seems strange that they let the stock go so cheaply in the first place. For the answer to this question we have to go back to the original prospectus, in which they say:
In relation to the existing major shareholders, the prospectus has this to say:
These have given their assurance (page 57) that they would not be selling any shares for six months from listing – a time period which has not yet expired. So even if they did give away the shares too cheaply during the IPO (but why would they do this?) they would still not be permitted to sell the shares at this time. At worst, it seems, the shares were just "coming off a low base".
What is your theory?
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Watch the BlogCast on video
Now, I'm not going to comment on the investigation by the Singapore Exchange into possible price manipulation, which was called for by 33 retail investors who had gone to see the Securities Investors Association (Singapore) about their concerns. I do not profess to have any knowledge of whether there was any price manipulation or not. The company has also said it also doesn't have any knowledge of what caused the price to fluctuate so much.
But it sure seems strange that they let the stock go so cheaply in the first place. For the answer to this question we have to go back to the original prospectus, in which they say:
Our Company presently has no intention of purchasing our own Shares after the listing. However, if we decide to do so later, we will seek our Shareholders’ approval in accordance with our Articles and the rules of the SGX-ST.
Our Company will make prompt public announcement of any such share purchase and has also given an undertaking to the SGX-ST to comply with all requirements that the SGX-ST may impose in the event of any such share purchase.
In relation to the existing major shareholders, the prospectus has this to say:
Uni-Asia was established in Hong Kong in 1997 by founders Motokuni Yamashiro, Kazuhiko Yoshida, Michio Tanamoto and Takanobu Himori who were Japanese bankers. Each of the founders has over 25 years experience in the banking industry working in corporate loan syndication and structured finance arrangement. Mr. Himori left our Company in March 2004. The other founders continue to lead the business and as at the Latest Practicable Date, they own, directly and indirectly, a significant aggregate equity interest in Uni-Asia of approximately 23.9%.
These have given their assurance (page 57) that they would not be selling any shares for six months from listing – a time period which has not yet expired. So even if they did give away the shares too cheaply during the IPO (but why would they do this?) they would still not be permitted to sell the shares at this time. At worst, it seems, the shares were just "coming off a low base".
What is your theory?
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Watch the BlogCast on video
Labels: IPO, Singapore Exchange, Uni-Asia
Straits Times Index Revamp: now even less relevant
The Straits Times Index will be relaunched next year with thirty stocks, but we think this will face lift will not hide its wrinkles, or lengthen its life span. Rather, it will hasten its demise. And that's a good thing. The Straits Times Index is at odds with the Singapore Exchange's tie-up with FTSE Group to develop new indices for our market which adhere to global standards (a move which is to be applauded). After all, an index is supposed to provide a benchmark. What's the point of having a benchmark which does not apply consistently across the globe? The sooner we let go of this relic, the better.
The new Straits Times Index reminds me a lot of the Dow Jones Industrial Average in the United States. It also consists of thirty stocks. But while it might be interesting to look at the so-called top stocks (we could debate the composition) it is of little use to investors. The S&P 500, which obviously takes many more stocks into account, is a far better barometer of the market.
Similarly, even when the Straits Times Index still had 48 or 50 stocks (in terms of the consistency, the STI was pretty useless to begin with) it represented only around 60% of the total market capitalisation of SGX-listed equities. We need an index that adheres to global standards, and is more inclusive of the market.
I would acknowledge a counter-example in the All Ordinaries Index in Australia. It has more shares than the S&P/ASX-200, but is no longer considered the benchmark. But again, the old index gave way to the new, in the same way I think the Straits Times Index's days are numbered. For many years until 2000 the All Ords was the benchmark everybody looked at, largely because there was nothing better around. When the Australian Stock Exchange sold its indexing business to Standard & Poor's, and the S&P/ASX index series was created, the All Ords was recognised for the dinosaur it was. Even though it was cut back to the top 500 stocks by market cap (and applying the other criteria which these large indexing companies apply, such as freefloat), the S&P/ASX-200 became the new benchmark. The extra 300 stocks the All Ordinaries Index covered made up such a small percentage of the market that the S&P/ASX-200 became considered as far more representative of the stocks that mattered. So, the index with fewer stocks became the benchmark of choice.
However, I don't think we will see the index with fewer stocks, that is, the Straits Times Index, to remain the benchmark in Singapore, in the same way that we don't consider the S&P/ASX-20 or the S&P/ASX-50 as the benchmark in Australia. Too few stocks, too unrepresentative in market cap terms of the entire market.
Therefore, I cannot see a logical reason to keep the Straits Times Index. In my view, the only reason why FTSE is persevering with the Straits Times Index is due to nostalgia, to provide a cross-over period until the new FTSE indices become more established, or because of SPH's continued involvement in the indexing business. None of them good enough reasons to keep it.
My prediction is the Straits Times Index will be relegated to a second mention on the evening news, just as the All Ordinaries now plays second fiddle to the S&P/ASX-200, and the Dow Jones Industrials Average is always only mentioned in conjunction with the S&P 500.
The new benchmark to watch is the FTSE ST All Share Index. With 98% of the market covered, it will be far more relevant to what's going on. And because "FTSE ST All Share Index" is such a mouthful, and continues with the free advertising for a newspaper, we're just going to call it the "Footsie-All Share Index" or the "All Share Index".
Mark Laudi
ArchivesThe new Straits Times Index reminds me a lot of the Dow Jones Industrial Average in the United States. It also consists of thirty stocks. But while it might be interesting to look at the so-called top stocks (we could debate the composition) it is of little use to investors. The S&P 500, which obviously takes many more stocks into account, is a far better barometer of the market.
Similarly, even when the Straits Times Index still had 48 or 50 stocks (in terms of the consistency, the STI was pretty useless to begin with) it represented only around 60% of the total market capitalisation of SGX-listed equities. We need an index that adheres to global standards, and is more inclusive of the market.
I would acknowledge a counter-example in the All Ordinaries Index in Australia. It has more shares than the S&P/ASX-200, but is no longer considered the benchmark. But again, the old index gave way to the new, in the same way I think the Straits Times Index's days are numbered. For many years until 2000 the All Ords was the benchmark everybody looked at, largely because there was nothing better around. When the Australian Stock Exchange sold its indexing business to Standard & Poor's, and the S&P/ASX index series was created, the All Ords was recognised for the dinosaur it was. Even though it was cut back to the top 500 stocks by market cap (and applying the other criteria which these large indexing companies apply, such as freefloat), the S&P/ASX-200 became the new benchmark. The extra 300 stocks the All Ordinaries Index covered made up such a small percentage of the market that the S&P/ASX-200 became considered as far more representative of the stocks that mattered. So, the index with fewer stocks became the benchmark of choice.
However, I don't think we will see the index with fewer stocks, that is, the Straits Times Index, to remain the benchmark in Singapore, in the same way that we don't consider the S&P/ASX-20 or the S&P/ASX-50 as the benchmark in Australia. Too few stocks, too unrepresentative in market cap terms of the entire market.
Therefore, I cannot see a logical reason to keep the Straits Times Index. In my view, the only reason why FTSE is persevering with the Straits Times Index is due to nostalgia, to provide a cross-over period until the new FTSE indices become more established, or because of SPH's continued involvement in the indexing business. None of them good enough reasons to keep it.
My prediction is the Straits Times Index will be relegated to a second mention on the evening news, just as the All Ordinaries now plays second fiddle to the S&P/ASX-200, and the Dow Jones Industrials Average is always only mentioned in conjunction with the S&P 500.
The new benchmark to watch is the FTSE ST All Share Index. With 98% of the market covered, it will be far more relevant to what's going on. And because "FTSE ST All Share Index" is such a mouthful, and continues with the free advertising for a newspaper, we're just going to call it the "Footsie-All Share Index" or the "All Share Index".
Mark Laudi
Labels: FTSE, market capitalisation, revamp, Singapore Exchange, Straits Times Index
January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 July 2006 August 2006 September 2006 October 2006 November 2006 December 2006 January 2007 February 2007 March 2007 April 2007 May 2007 June 2007 July 2007 August 2007 September 2007 October 2007 November 2007 December 2007 January 2008 February 2008 March 2008 April 2008 May 2008 August 2008 September 2008 October 2008 November 2008 January 2009
