Last October’s penny stock crash that wiped out an estimated S$8 billion and rattled Singaporean investors’ confidence prompted the Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) to develop new guidelines designed to bolster the strength of the local stock market.
This smart and forward-looking joint initiative will undoubtedly improve investor protection while repairing the reputation of Singapore’s securities market and ensuring it remains among the world’s best with respect to international compliance standards and regulations.
It’s also a balanced response to falling trading volumes at the SGX since the crash.
In a joint consultation paper published last February, the three key areas the SGX and the central bank proposed enhancing include:
· promoting orderly trading and responsible investing
· improving the transparency of market intervention measures
· strengthening the process for admitting new listings
By establishing three independent committees dedicated to addressing each of these measures, as well as a number of others implemented by the SGX such as establishing “circuit breakers” to prevent wild swings in stock prices, retail investors in Southeast Asia’s largest equities exchange will benefit from the greater transparency and clarity around the instruments in which they’ve invested.
Short-Term Pain, Long-Term Gain
Market participants had until early May to provide feedback on the proposals. Upon hearing that transparency remains a concern for many with respect to secondary listings, the SGX proposed a new methodology for how these companies will be classified by slotting them under a developed or developing markets designation.
Thus, if a company is listed on any of the 23 developed market exchanges like the Australian Securities Exchange, the SGX will make it easier for that company to create a secondary listing in Singapore to access a wider pool of investors. This move is also an attempt by the SGX to boost its trading volume and attract larger initial public offerings.
Following a public consultation process, these measures are expected to be implemented in early 2015.
Though the bourse may “feel the pinch” with respect to these changes in the short term as it might affect liquidity, the long-term benefits the SGX and investors will realise far outweigh any temporary pain. That’s because the proposed improvements are designed to diminish the short-term mindset that some investors trade with on the SGX.
The intent here is to help both investors and Singapore’s markets mature.
Singapore is considered to be a barometer for Southeast Asian economies. As the SGX makes necessary changes and the MAS increases oversight of how securities are listed and traded here, it will fuel growth and inspire investor confidence in all asset classes.
In Defence of Investors
We applaud these new measures. The MAS is assuming a leadership position with the implementation of these changes that will help protect investors.
Regardless of asset class, it takes time and patience to learn to trade smartly and to achieve your short- and long-term investment goals. All investors should make it their priority to do their due diligence before investing in any financial instrument.
A simple, three-step guide to do-it-yourself investing I always recommend is this: keep it simple, avoid fees, and never buy anything you don’t fully understand. To that end, education is key to investing in anything be it a stock, commodity, or forex.
Fair retail trade practices for any instrument are underpinned by transparency and treating your clients fairly and with the respect they deserve. That’s been our perspective – and practice – from the firm’s earliest days.
High performance global economies demand robust regulatory oversight. The stricter regulations proposed by both the SGX and MAS are indeed welcome and required.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the author's; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers, or directors.
Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
Do you know more about this story? Contact us anonymously through this link.
Rajesh Yohannan leads OANDA’s Asia Pacific business headquartered out of Singapore. An entrepreneurial, results-oriented executive with extensive experience in financial services, digital marketing, mobile banking, mobile payments, call center management, operations and technology, Rajesh is responsible for driving OANDA’s continued growth across the Asia-Pacific region. Prior to joining OANDA, Rajesh was the Managing Director and Global Mobile Banking Head at Citibank.