What kind of stock market does SGX really want?

Mr Chew Sutat, head of equities and fixed income at the Singapore Exchange (SGX), appears sanguine in his response to the growth of South-east Asian bourses ("SGX's share of IPOs shrinks as regional rivals step up"; April 1).

The Singapore Business Federation has described our stock market as "moribund" ("'Use CPF money to help liven up local stock market'"; Jan 7).

The SGX needs to understand why this description may not be inaccurate.

In the absence of deep liquidity, existing scrip borrowing and lending rules facilitate shorting of securities. This could lead to our market going down.

At the same time, the SGX often questions price movements and sometimes issues Trade with Caution (TWC) advisories. This suggests that it is not comfortable with prices going up.

So what does SGX really want? What kind of ecosystem has it created?

This is the conundrum stakeholders and investors face when they look at our market. It could be one of the main reasons many aspirants for a listing have given us a miss.

It is arguable whether issuing TWC advisories is helpful.

What is certain is that, however unintended, it creates a climate of fear among investors, as it casts aspersions not only on the affected stocks but also the market in general.

Attempts to kill the weeds early can also kill the entire wheatfield.

The idea of trying to predict crime before it happens has always been flawed, and the unintended consequence is the creation of a pall over the market.

In the past, SGX removed the lunchtime break, narrowed the bid/offer spread and introduced 100 shares board lot.

Ostensibly, these were done to generate volume. The effect, however, was the unlevelling of the playing field in favour of predatory computerised trading vis-a-vis real investors. Investors who have been hurt stayed out of the market. Interest waned, leading to lower prices and lower volume. A vicious circle ensued.

Markets require that ubiquitous buzz to attract listings and investors. An objective observation of the scene finds that buzz missing.

What SGX must ask itself is: Has its actions contributed to or snuffed out that buzz?

Tng Kim Bock