The recent trading halt of Blumont Group had raised a number of eyebrow among Singaporean investors. Many local investors thought that investing in the stock market is akin to gambling, which is untrue. When it comes to investment, many Singaporeans don’t even know the difference between risk and uncertainty. In salient, risk in stock investments can be managed through the proper technique.
However, when it comes to gambling, you will not be able to predict the outcome and win consistently. Because of the lack of knowledge and self-awareness, most wealth builders tend to speculate in the stock market, resulting in the tip based investment culture in Singapore. The recent case of SGX suspending the trading of Blumont Group vindicated my thoughts.
Blumont Group, which was previously involved in the packaging, property and investment sectors, started investing last year in a number of companies in sectors such as iron ore, coal, gold, uranium and copper. On 4 Oct, Blumont was one of three companies suspended by the Singapore Exchange after their share prices plummeted by 40 to 60%. A Singapore broking house had also recently declared its shares as “designated securities.” That means investors cannot short-sell them, and purchases via the broking house must be paid for upfront with cash. Local brokerages sometimes put a trading limit on a stock if they believe it has run up above what they believe is a fair valuation.
An educated investor would know that investing in a company with new business direction is always risky and involves a lot of uncertainties due to the company’s lack of track record and experience. In the case of Blumont Group, investors need to pause and examine the fundamentals first before even thinking of buying the stock.
Remember, don’t be in a hurry to lose your money. The company may have announced many exciting investment projects, but these investments may need years to bear fruit and provide revenue to the company. Investors need to determine their safety of margins before dipping into this counter. Don’t be swayed by your brokers or friends to trade and make quick money. You can never beat the market unless you do your homework.
SG Wealth Builder