On 3 March 2016, Singapore bourse operator, SGX, included 41 listed companies into its infamous watch-list due to the implementation of the 20-cent Minimum Trading Price (MTP) rule. In all, there are 76 companies under the SGX watch-list, which is like the Hall of Shame.
To be part of this watch-list is very embarrassing because it means that affected companies have to buck up and improve their share price and financial performance. Otherwise, they face the prospect of being de-listed from the stock exchange.
The expansion of the watch-list to include companies failing to comply with the MTP rule has riled market players because this move essentially blurs the distinction between market quality and business fundamentals. To be fair, even though a company’s share price is trading below 20 cents, it does not mean that the company has shaky business fundamentals. So to put those failing to meet the MTP with those companies with financial problems is deemed by many to be onerous.
To put things into perspective, the MTP rule was introduced in the aftermath of the penny stock crash in 2013. Many retail investors lost their pants after dabbling in Blumont, LionGold and Asiasons Capital. The three penny stocks surged to incredible levels within a short period of time and then dived spectacularly, prompting rumours of market manipulations by the Big Boys. To prevent this sort of incident from happening again, SGX introduced the MTP in a bid to raise the quality of shares in the SGX.
To be frank, I am not sure whether this MTP will actually serve its intent to improve the stock market and prevent market manipulations by the Big Boys. To meet this rule, many penny stock companies have to resort to share consolidation to avoid being in the watch-list.
Then again, meeting this MTP rule does not necessarily means that the business fundamentals are sound or otherwise. It also does not guarantee against any further decline in share prices. In any case, it only creates more compliance costs for the listed companies because of the need to do share consolidation exercises for many affected companies. In trying to address a problem, SGX creates another monster for the industry to tackle.
To make matter worse, the MTP rule causes a lot of confusion among investors and raises questions on the arbitrary price ($0.20) set for the MTP. The SGX watch-list contains companies with financial problems and so to include the MTP non-compliant companies in this list will be confusing to investors.
Take Noble Group for example. In February 2016, the commodity trader was still in the prestigious heavyweight STI. Then the following month, it was kicked out of the benchmark and at the rate the share price is declining, it will probably be relegated to the MTP by the end of this year. For many investors, the fate of Noble Group may seem like a strange one because in a matter of only a few months, it would transform from a Singapore blue chip to a junk stock under SGX watch-list?
There are many financial bloggers who are of the view that one should be patient and be long-term investors when it comes to stock investments. However, I am a more pragmatic person and often question this tactic. Investment trends change all the time and what are applicable 10, 20 or 30 years ago may not be applicable in current climate. In today’s context, companies can be forced to de-list, take-over by bigger competitors or declare bankrupt. When these happen, very often, minority shareholders are at the losing end.
The matter of fact is that stock investments may not be for everyone because picking the right stocks to invest is a form of art and science. Thus, you definitely cannot adopt a buy and hold strategy, even for blue chips. To make money from investments, of course you need to take risks, but you also need to diversify as well. In this blog, I always encourage wealth builders to buy gold and silver bullion in Singapore to preserve wealth and to mitigate the risks from the stock market fluctuations.
In Singapore, you can choose to buy physical gold from BullionStar, one of the largest online bullion dealers with a store-front shop at 45 New Bridge Road. With BullionStar, you can choose to buy gold or silver bullion online and have them delivered to your home or put them into ‘My Vault’ storage in BullionStar’s secure vault storage facility. Alternatively, you can choose to walk in and buy gold and other precious metals at BullionStar shop and showroom premises.
Setting up an online account is pretty simple and you can choose to pay in different currencies, including Singapore dollar and Bitcoins. In addition, the price is very transparency as BullionStar’s website displays the price premium and spread for each bullion. This allows buyers to make price comparisons online before making the purchase.
BullionStar also offers customers their own minted gold and silver bars with zero spread. They have commissioned world-renowned LBMA-approved Swiss gold refiner Argor-Heraeus to produce these stylish and unique minted 100 gram 99.99 % purity gold bars.
Below are some gold bullion offered by BullionStar that are worth buying:
Singaporeans who still think that they can win the stock market should wise up. The matter of fact is that the odds are stacked firmly against retail investors and those who did not diversify their portfolios are taking on big risks. Just one market correction and their wealth would be gone. Instead of risking your hard-earned money on speculative shares, start buying real physical gold from a trustworthy bullion dealer.
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SG Wealth Builder