Singapore stocks: Once bitten, twice shy

[weijian]

Well, investing in overseas markets has different sets of challenges, e.g. field research, attending in-person AGM/analyst briefings, holding significant amounts of forex long term, understand listing rules.

And if one were to broaden the scope of "pond fishing" and assuming investing is primarily to make money, perhaps one could benchmark agst index returns/alternate asset classes or even SG median income from work, etc.

At the end of the day, I suppose the question is - is investing in SG stocks still worth it ?

hi dreamybear,

Glass half full or half empty? All of us have our own biases as a result of our own unique circumstances and environment. So there isn't a right or wrong here. It's folly to try to implement wholesale another person's bias onto oneself. But of course, our goal in life is to eliminate our own biases over time - a little wiser every day.

I will direct 2 articles that took my attention recently. These are SGX researched articles, probably from their indices (iEdge) BU:

https://www.sgx.com/research-education/m...gains-july

https://www.sgx.com/research-education/m...not-always

The above articles reflect stuff that many astute VBs already know:

(1) STI Index might have returned "single digits" but within the index, its large caps drove much better returns at double digits, which is very similar to the Nasdaq/S&P500 in terms of lack of market breadth. So the intelligent question is, is one better off in the performing large caps?

(2) Beyond the large caps in the index, which are not a lot since STI index is just made up of 30 stocks, there are much more stocks that have also given double digit returns. The intelligent questions to ask ourselves are Do we have the temperament to find them ahead of time? What should I change about myself to find them ahead of time?

Do we wait for the market to come to us? Or do we go to the market? Of course, all of us prefer the former.  In the TheHourGlass thread, VB dydx mentioned that the Tays bought a prime location storefront 7years before it was converted to a Rolex boutique. While it is possible that Rolex had promised them a storefront when they first bought it, but I tend to suspect that they bought the storefront first and then actively courted Rolex before one eventually materialized 7 years later. The Tays have provided OPMIs with some decent returns if one decided to ride along. But I think more importantly, besides horology (if one is interested), they impart lessons that are invaluable in our own journey, if we observe enough to ask the right questions with the right attitude.

[ghchua]

I learnt the hard way for (3) where a Singapore company played the hard way of refusing to seek for refinancing when it was forced to delist. In the end, minority became certificate holders for a profitable company while the CEO continues to draw a good pay.

Hi CY09,

I guess I have encountered these instances too and SGX had some rules in place. But I am quite disappointed with them because minorities are still in a losing end.

For example, if a company that had been directed to delist and still solvent but the controlling shareholder/company refuses to give an exit offer, SGX can actually direct them to give an alternative exit offer - i.e. To liquidate the company and distribute the proceeds to all shareholders. However, in order to liquidate the company, an EGM had to be held and needs 75% approval from all shareholders. The controlling shareholders are not required to abstain from voting. Needless to say, it would not be carried unless the controlling shareholders voted for liquidation, as seen in the Firstlink Investments case study whereby it had been delisted without an exit offer.

Another example is in the case study of Nico Steel, whereby there is no liquidation proposed nor any exit offer given. However, shareholder approval is required to delist without exit offer and an EGM had been proposed. Nobody is required to abstain from voting. Needless to say, the resolution had been carried and it had been delisted without an exit offer.

The above two case studies had shown that there are "safeguards" in place for directed delisting without exit offer for solvent companies. Unfortunately, I feel that they are not enough to protect minorities. Both the above case studies had shown that minorities had been out voted.

Even in cases where there is an exit offer for directed delisting, it doesn't mean that you will get the offer. In the case study of Europtronic Group, there was an exit offer tabled to all shareholders, but it is conditional to 50% acceptance at the close of the offer. Unfortunately, the company was delisted without an exit offer as the acceptance condition was not satisfied at the end of the offer period.

[weijian]

https://www.channelnewsasia.com/singapor...gx-4521916

Besides questions, I think quality answers are equally important.  

Keynote Speech by Tan Boon Gin, CEO of SGX RegCo, at the inaugural ISCA-SAC BOD Masterclass
https://www.sgxgroup.com/media-centre/20...ca-sac-bod
"The heart of effective market discipline is the active investor – a shareholder who is prepared to ask the difficult questions, requisition meetings to compel change, and vote with both hands and wallet to hold companies and boards accountable

I had thought SGX RegCo Tan Boon Gin would be better than the non-executive chairman as the SGX representative. Maybe the latter is just the figurehead and the underlings (executives) do the work.

Putting aside the criticisms on the composition of this MAS review group, OPMIs do have to applaud that the authorities are doing something. But whether anything tangible improvements materialize, is altogether another thing.

Spore is small in size and can't really be compared to its neighbours. For example, in Msia, MNCs are able to take advantage of lower costs and a big(ger) domestic markets to setup their mfg/distribution operations for export as well - So Bursa Msia has Carlsberg Msia, Dutch Lady Milk Industries Berhad or Ajinomoto Malaysia to name a few. SGX is surely punching above its weight class when it has ThaiBev listed here, and ThaiBev had almost negligible spore ops before it fought for F&N. What about the Taipans who "only" secondary listed most of their subsidiaries here after leaving HK before the 1997 handover?

SGX will represent broader views in MAS review group: CEO

But Loh assured that the group will seek the views of those outside the group. “We will obviously represent what we hear and what is being suggested to us by the broader ecosystem,” he said.

Loh was responding to questions by the media at SGX’s financial results briefing on Thursday (Aug 8) about the composition of the review group and if industry players such as brokers and remisiers should be part of the group.

SGX’s chairman Koh Boon Hwee is a member of the 10-person group which was convened last Friday. The group is chaired by Second Minister for Finance and Monetary Authority of Singapore (MAS) board member Chee Hong Tat.

https://www.businesstimes.com.sg/compani...-group-ceo

[weijian]

When the 10-person group chaired by a minister was formed, it was disappointing to see only 1 private sector representative. Now, 2 separate groups have been announced and the team list announced - we see the line-up is heavily stocked with folks from the private sector. These guys have skin-in-the-game and so I would think it is much better.

Even David Gerald, SIAS founder is part of the team. The NUS academia representative is unfortunately not Prof Mak. I was actually looking for his name but another came up.

Equities Market Review Group Convenes Inaugural Meeting, Identifies Priority Areas, and Announces Members of Workstreams

Singapore, 27 August 2024… The Equities Market Review Group held its inaugural meeting on 19 August, chaired by Mr Chee Hong Tat, Minister for Transport, Second Minister for Finance and Deputy Chairman of the Monetary Authority of Singapore. The meeting discussed key challenges and opportunities facing Singapore’s equities market, and set out its strategic direction for the review.

2 At the meeting, the Review Group identified the following priority areas for the two workstreams:

a. The Enterprise and Markets workstream will focus on ideas to encourage listings, increase investor participation, improve trading liquidity and facilitate fair valuation for listed equities.

b. The Regulatory workstream will study ideas to streamline the regulatory framework, improve the listing process, enhance the effectiveness of our disclosure-based regime, and strengthen corporate governance standards, investor access and recourse.

https://www.mas.gov.sg/news/media-releas...al-meeting

[weijian]

A 12year old article by Prof Mak that has aged relatively well (or not well, depending on where you stand).

Unfortunately, this is 1 of the rare occasion that I disagree with Prof Mak's assessment that "SGX should not punch above its weight", not that my disagreement is a big deal of course.

I have had my fair share of losses from S-chips but I have also benefitted as a long-term SGX shareholder. There are pros/cons when trying to punch above your weight, and I believe the worst thing is not trying. As an OPMI, we recognize reality and play accordingly to the rules of the game, not how we think the rules should be.

SGX should not punch above its weight

Here’s an old article of mine published in The Business Times in 2012 that may have some lessons for today.

According to the World Federation of Exchanges (WFE), the SGX has the highest percentage of foreign issuers among the top international exchanges. As at the end of 2011, foreign companies made up more than 40 per cent of all companies listed on the SGX, a substantial increase from 13 per cent in 2000. By comparison, the percentages of foreign companies are about 23 per cent and 21 per cent on the NYSE Euronext (NYSE) and London Stock Exchange (LSE), respectively. Chinese companies now make up 46 per cent of all foreign listings on the SGX, and regulatory enforcement for foreign listings has become a major issue in Singapore.

The SGX can probably be an exchange for high quality companies if its ambitions are more realistic. For example, it could focus on helping good local companies list and access capital. Or it can focus on attracting quality companies with a large customer base or major business partners in this region, such as Asean companies – perhaps as dual listings, such as the recent case of IHH Healthcare. However, it is clear that the SGX wants to punch above its weight, and it is challenging when a natural welterweight tries to compete in the heavyweight division of global stock exchanges. Investors may be the ones facing the knockout in such a contest.

https://governanceforstakeholders.com/20...ts-weight/

[specuvestor]

Maybe Prof Mak should study why once buzzling SESDAQ is dead

It’s to strike a balance between animal spirit and fraud avoidance. 水至清则无鱼 cannot over regulate and aim for zero problem

[CY09]

Do agree with Weijian words "As an OPMI, we recognize reality and play accordingly to the rules of the game, not how we think the rules should be.".

For investors, I would recommend looking to HK stock exchange. My view is that there seems to be more companies who self regulate themselves in corporate governace. It might be a better place for us to accumulate and grow our wealth there as compared to always praying and hoping Singapore Towkays will share wealth with you as an OPMI

[dzwm87]

I think HK has its even larger share of frauds and pump and dump schemes but with it, the exchange also enjoy its share of growing enterprises. NYSE and NASDAQ also share similar characteristics, it's just that these exchanges have such vast companies listings that most of it is not known to the general investors.

As equity investors, there is always an embedded risk that you can lose your shirt. You move on, learn from it and hope it is not too big to wipe out your portfolio. Perhaps, SG generally has more investors who want 8-10% annual return but on a risk-free structure.

[weijian]

I think HK has its even larger share of frauds and pump and dump schemes but with it, the exchange also enjoy its share of growing enterprises. NYSE and NASDAQ also share similar characteristics, it's just that these exchanges have such vast companies listings that most of it is not known to the general investors.

As equity investors, there is always an embedded risk that you can lose your shirt. You move on, learn from it and hope it is not too big to wipe out your portfolio. Perhaps, SG generally has more investors who want 8-10% annual return but on a risk-free structure.

hi dzwm87,

I assume no base rates are available here to compare the fraud/CG issue % normalized to the total no. of listings at each jurisdication? 

Personally, I think the reason why folks throw stones at the local market but not at foreign markets, is mainly because the latter's representative indexes (eg. S&P500, Nasdaq, DJIA) had been providing good returns. These good returns easily mask over those "fraud/pump and dump", with "fraud/pump and dump" becoming a bug while "good returns" the feature. Since STI did not enjoy that sort of returns for the feature, its "fraud/pump and dump" became the feature.

Value guys will not forget Webb-site's Enigma and Nefarious network in the Hang Seng, where the no. of companies involved dwarfs that of SGX's penny chip saga. But with HSI lagging over the past half decade, investors are surely and slowly losing their patience, just as they had done with STI (Super Terrible Index!). We could be witnessing the HSI transforming from "Ho Sey Index" to "Ho Si Index"??

I have read multiple interviews/thoughts from different stakeholders on the MAS review group. I couldn't believe what I read when some of them (more towards the retail side) opined that "an objective of the MAS review group should be helping minorities earn a decent return on their hard earned money". So you hit the nail on the head with your last statement.