Thursday, December 16, 2021

Investing Ponderables


Stamp Duty Hike from 0.1% to 0.15%  

That was not a smart proposal. It already makes an "expensive" small Asian bourse even more so, and it's not like our bourse offers something highly significant or unique compared to other regional markets. If you want to collect more tax revenues, use the GST, that's more effective. What some people do not appreciate is that a small move has leveraged effects. The approximate value of stamp duty charged last year was around RM500m. So we are looking at an extra RM250m ... but is anyone calculating the dampening effect of that move, which will surely bring the trading volumes down. Net net, we all lose.

Do you know what the big foreign brokers are paying in commission for local stocks? 0.05%-0.1%, that's it... hence the hike in stamp duty is a big thing for them. 

It is a smallish sum but it affects the most vulnerable traders. Needless for me to say, they make up a substantive portion of daily volume. They provide the grease and liquidity for volumes to move. Now its a dead market, no more lubricant, big sellers cannot sell, big buyers cannot buy, small day traders avoiding the market as no liquidity means cannot make money.

Just a small move can pull the markets back substantially. Markets are all about sentiment. This move is backfiring on us. 


Sophisticated Investors

The LEAP market is only available to sophisticated investors. Herein lies the issue why some companies are throwing in the towel by exiting LEAP. Volume and liquidity are critical for any markets to function properly. The current rules set up are too cumbersome and restrictive.

  • Why are LEAP Market investors limited to Sophisticated Investors?

    As one of the guiding principles for this market to have facilitative rules and regulations, this market will only be available to Sophisticated Investors who are deemed to have better knowledge on the potential risk and return of this market.

    I think it is RM5 million before you are termed as sophisticated investors. RM5 million does not qualify anyone as sophisticated investor. Some of the most qualified investors are worth a lot less than that. That is like getting a Masters from Stanford because you have RM5 million.

    Is it because they have RM5 million to lose? Or is it they have to better understand the risks of investing?

    Cause if you are talking of risks in investing ... the normal stocks listed on Bursa are already RISKY. Sure on Bursa there are blue chips but look at the top 20 volume stocks everyday, most of those are some of the riskiest stocks you can come across ... and played by many who cannot afford to lose much.

    There is a big discord here in reasoning. Name me any company on LEAP and I can name you 20 stocks on Bursa more risky.


First Out Best Dressed

This may or may not be a right or wrong issue (read that line again). The recent debacle surrounding ATAIMS - thanks to pressure exerted by a lobbyist on labour issues. When ATAIMS finally caved with two or three rounds of limit downs, the activist say there may be other "targets". What was giving a bitter after taste was that KWAP and EPF sold some of their substantive stakes in other related counters.

Now, lobbyists may or may not be "good" but certainly they shouldn't be allowed to run roughshod over any listed companies without proper due process. Imagine being at the mercy of foreign NGOs, and we shit ourselves before putting up proper "checks and balances ourselves". Why leave ourselves at their mercy?

It is absolutely the right of an institutional investor to sell or buy to rebalance their risk, but doesn't it leave an awful taste in your mouth when our pre-eminent institutional investors sell first and ask questions later?

I am not saying all foreign lobbyists are evil. I am saying why don't our institutional investors ENGAGE with these companies first. Find out and see if the claims or whispers have credence. If the claims are without basis, then our collective institutional investors can come up and say so and not be at the mercy of unsubstantiated claims.

We saw nothing of that. We only saw "first out best dressed".

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