Date: June 5, 2010
|Chairman of SIAS, Mr Tan Chok Kian,
President & CEO of SIAS, David Gerald,
Members of SIAS,
Ladies & Gentlemen,
1 I am very pleased to be able to join you at the start of your 2nd SIAS Asian Investment Conference & Exhibition. Thank you for inviting me.
2 I congratulate SIAS for its excellent work in the past decade and more, particularly on behalf of the individual investor. SIAS caters principally to the retail investor, and my remarks are largely meant for that class of investor.
Economic and Market Outlook
3 The outlook for the world economy and financial markets now is significantly less lugubrious than it was last year. Equity markets in particular have staged a remarkable rebound. Yet, there does not seem to be any strong sign of irrational exuberance in the air, particularly in developed markets.
4 Part of the reason for this outbreak of subdued, rational behaviour may be that investors have too often been bush-whacked when the going seemed good, or perhaps, too good to be true. If that is so, it reveals welcome sobriety and restraint on the part of long-standing investors with elephantine memories.
5 Or, it could be that, while investors see signs of economic recovery, even in the US and parts of Europe, they are unsure of its sustainability, in the light of continuing weakness in financial institutions, fiscal improvidence, high and rising public debt, weak recovery in employment markets, and so forth. And they don’t entirely buy this new-fangled theory of Asian
Black Swans, Caution and Investing
6 So, investors sense a flock of black swans below the radar horizon, and wonder when one of them will swoop in. A black swan by definition is an unknown unknown. So, when, where and how it will strike, nobody knows. That investors are cautious is understandable.
7 Being cautious, and being invested, are not mutually incompatible goals. Not being invested is also a risk. Some may wonder, what else could I, coming from an Exchange, say. After all, the lifeblood of an Exchange for securities is turnover, or more specifically, the turnover velocity; that is, the relationship between the value of shares traded during the year to the market value of all stocks listed on the Exchange.
8 It so happens that the turnover velocity for our Exchange is under 60%, compared to triple-digit ratios in most developed exchanges. Those figures suggest that investors in our market may afford to loosen up.
9 I am not suggesting that the retail investor should plunge into churning of his portfolio. We may leave the frenzied trading to the likes of algorithmic and dark-pool traders, to which segments of the market SGX affords ample facilities, the latest being our near speed-of-light trading system, if you will allow me some poetic licence.
10 For the retail investor, long-term investing should be the watch-word. Long-termism does not necessarily mean just sitting placidly on a portfolio of shares. It entails intelligent rotation across asset-classes, sectors, and companies within a sector.
11 That type of intelligent investing will be facilitated by the recently announced spectrum of 58 new indices by industrial sector and so-called super-sector. Together with the 19 existing sectoral indices, that makes a total of 77 sectoral indices offered on our market, which should satisfy the most discerning and enterprising of investor. The promise is that suitable products such as ETFs will be crafted from those indices.
12 No set of remarks by someone from a regulatory organisation is complete without a word on governance. So, I appeal to SIAS members to take seriously this business of governance of corporations that you invest in. Try to read their annual reports, even if in digital form, study their corporate announcements during the year, attend general meetings, and put pertinent and searching, but brief, questions to the board.
13 Get your teeth into the corporate governance section of the annual report, and check whether the company has conformed to every principal and guideline in the Code, or CGC. Examine the attendance report to establish that directors are, at least, taking the first steps towards due diligence.
14 Not much purpose is served by labouring on obscure points in the financial statements, or berating the board for perceived generosity on executive compensation. Demanding value for money is eminently justified, visceral whining is altogether different, and the two manifestations should be distinguished.
15 Investors should be aware that rules, regulations, laws and codes are one thing while the software of governance is something else. Regulators and lawmakers try to provide the lead, but may not move too far ahead of society’s response. That response is the responsibility of every shareholder. For governance to progress and standards to improve, both sides have to play their part.
16 With that exhortation, may I leave you now to enjoy, unhindered, this seminar and exhibition. I wish you wise, safe and profitable investing, especially in our Singapore market. Once again, thank you.