Do more to protect small investors
YESTERDAY'S reports ("Time to rethink rules on short-selling" and "Record year for mergers and acquisitions") offered insights on how the confluence of high-level decisions by corporate investors and owners, as well as industry research firms, can potentially make or break the viability of a public-listed company.
Sophisticated corporate investors and speculators use short-selling and call options to milk dry the capital markets. The complex derivative markets are designed for professional speculators' immediate short-term gains. So the investment risks spiral upwards for small retail investors.
It is ironic that while financial advisers recommend long-term investment strategies to small retail investors, the actual immediate short-term gains have been stealthily predetermined for big players such as hedge fund managers and professional speculators. They are the real gainers in the capital markets.
As public defenders of the rights of small retail investors, the Securities Investors Association of Singapore and the Singapore Exchange (SGX) can do more.
Clear analyses of the historical data of stock price movements due to the impact of mergers and acquisitions, as well as the adverse effects of high-risk short-selling practices on share prices, should be published for investor education.
Heartlanders should be cautioned against putting their hard-earned money into stocks that are suddenly exposed to short-selling, and mergers and acquisitions.
What measures have been taken by the SGX to prevent unscrupulous investment firms from publishing manipulative investment research advice for their own capital gains?
Perhaps it could consider ring-fencing certain high-risk counters from small retail investors. For example, S-chip shares should be restricted to only professional fund managers and corporate investors.
Another way may be to impose a limit on the maximum amount that can be invested by retail investors.