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First they came

Chew Sutat
Chew Sutat9/23/2021 08:57 PM GMT+08  • 10 min read
First they came
Q: Whose fault is it? A: The market is made up of all of us — surely
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Q: Whose fault is it?
A: The market is made up of all of us — surely.

In 1946, Lutheran pastor Martin Niemoller wrote about the cowardice of German intellectuals. The ending of his confessional poem, called “First They Came”, goes:

Then they came for the JewsAnd I did not speak out

Because I was not a Jew

Then they came for me

And there was no one left

Is it the media who amplifies the sensational stories from the past and can’t let go of them? Or, our local kiasu culture of reticence (when winning) and being champion complainers? Or, the governance perfectionists who have outsized voices beating the same impractical drums? Or experts, professionals and bankers who cherry-pick statistics for their own benefits as explored in Parts 1 and 2 of this series (see “Investing culture: A tale of two cities” in Issue 1001, Sept 6, and “Statistics don’t tell the whole truth” in Issue 1002, Sept 3)?

Or, can the situation be simply summed up in a wry comment received for the earlier articles: “Good read, bemoaning the Singaporean small-minded attitude towards markets that keeps them safe and inconsequential”? If it is real, where does it come from? And if so, is it intractable?

The politics of regulation

In perfectionist Singapore today, where there’s little tolerance for failure, it is almost impossible to be a regulator.

Back in the 1980s, we had less to lose as a marketplace. There were also fewer PQs (political questions) to answer, fewer grumbling forum letters, and non-existent social media to amplify criticisms within echo chambers.

Yet, with the gumption shown by the likes of Ng Kok Song and Lim Ho Kee at the Monetary Authority of Singapore (MAS), we dared to make big bets. Simex, which was subsequently merged into the Singapore Exchange (SGX), became a global leader in the derivatives trading of iron ore, Indian and Chinese equity and foreign exchange.

True, there had always been extremes. Bucket shops of gold speculation (with oversight by the Ministry of Trade and Industry and then-International Enterprise Singapore) were cleaned up alongside kampung tontine schemes, thanks to the Ministry of Home Affairs.

There have always been scams — even before the Nigerian emails or the recent solicitations over WhatsApp and WeChat. Accredited investors, including eminent lawyers, and professional investors, including the likes of Vickers Ventures Partners, were found to have fallen for the lure of 60% smooth returns from nickel financing.

Over-the-counter scams, whether from land-banking, ostrich farms, agarwood plantations or unlicensed financial institutions, have preyed on the public since time immemorial. And the number of enterprises on the MAS’s investor alert list just keeps increasing — including most recently, on Sept 2, Binance.com.

Now, what does that list really say? Is it “you have been warned”? Or, “it is not supervised”, otherwise known as “it is not my problem (hopefully)”?

Meanwhile, many of these entities continue to operate with impunity here, and they continue to target unsuspecting investors.

Our regulatory ambivalence for crypto has lured many players from jurisdictions that have drawn clearer lines. Is crypto to be regulated as a payment platform? Or should it be deemed a form of securities, a custody account, or another way to lend? Or, is crypto’s key role to perch at the top of the cheerleading pyramid at our annual Singapore FinTech Festival?

True, in the name of fostering innovation, we need to keep our doors open. However, we should be definitive about supporting the Good, flogging the Bad, and keeping out the Ugly. Or else, we should just mint and sell more non-fungible tokens within our tiny red dot in the interest of looking progressive, and distribute a dividend to citizens.

Therein lies the irony when it comes to the public capital markets. Ipso facto — they operate within a clear regulatory environment. In other words, someone is responsible and potentially at fault.

Hence, our marketplace often sends schizophrenic signals. On the one hand, we are seen as progressive and welcoming. Yet, we snuff out the exuberance in subsequent scrutiny on the other. Quite often, we end up with rules, but not deals.

To be sure, it is an impossible tightrope and a thankless task for the regulators, as they suffer yet another sleepless night wondering when the next inevitable business failure will take place — even though this is part and parcel of capital markets.

And what often follows is a witch hunt for who to lay the blame on, with the heat turned up when the tolerance levels of important stakeholders fall as retail investors lose money again.

Worst, assuming it is not a business failure but corporate malfeasance (which again is not a uniquely Singaporean phenomenon), the challenge regulators have is that by the time these issues surface, inevitably it is after the fact — because they cannot act when a crime has not yet been committed or established.

Let us be fair on who is to blame in these situations: the culprits are the equivalent of those who “over-pivoted” their KTVs to F&B, not the folks who are giving the compliant ones a lifeline to stay afloat.

It is up to companies’ management, boards and fee-collecting professionals to do the right things consistently and diligently. Shareholders, on their part, must also do their homework, vote with their feet and not invest in companies unable to give them their preferred level of comfort of transparency and disclosure. When they jump in based on the latest hot tip, they should not go around looking for someone else to blame if their investments go pear-shaped.


In 2008, the stock market crashed. No, not in Singapore. But the whole world. Some Chinese stocks and also local companies did not survive what is now known as the Global Financial Crisis, and were swept away by the tide of business failures. Some companies in Singapore did some illegal actions and some investors lost their shirts.

Many cycles of rule-tightening ensued, but still, when a bad actor is picked up after the fact, some investors lose money nevertheless. Those who rode the wave up and cashed out at the right time profited. Others who followed the excess leverage taken on by companies who folded when the business environment in energy and offshore marine shifted also lost their pants.

A notable fallout from the Global Financial Crisis was the (mis)selling of Lehman-linked “minibonds”. Such products spread far and wide through retail banking and broking channels. Around the same time, weak credit perpetual bonds were flogged through the distribution networks as well. For the accredited investors, they were privileged enough to be tempted with high-yield unrated bonds, with the price of entry starting from $250,000 a pop. When these investments turned sour, not merely were pockets burnt, scars were left on our regulatory psyche as well.

At this point, I need to stress: retail investors losing money is not a good outcome and not sustainable for Singapore’s social compact. Yet, there is only so much regulators can do to protect people from themselves.

MAS has done years of good work in promoting financial education — just check out the MoneySense website. Nonetheless, that should not absolve investors from taking responsibility for their own decisions. If industry rumours are to be believed, among those who queued at FIDREC (Financial Industry Disputes Resolution Centre) to file a claim over mis-sold Lehman minibonds included a certain CEO of a local brokerage, and the head of credit structuring at a European investment bank.

When those new events happened, regulators reacted by adding new rules, such as requiring CKA (customer knowledge assessment), or imposing SIP (specified investment products) tests.

Unfortunately, they’ve merely shifted a heavier burden on issuers in the form of higher compliance costs. Just look at how thick prospectuses — chock-full of disclaimers and risk-disclosure legalese — have become. One can’t help but wonder, beyond the product highlights sheets, would prospective investors actually bother to read the rest?

For some, it is much easier and more practical to just pay the $100 casino levy, and walk into Resorts World or Marina Bay Sands, or sign up with overseas online brokerage/CFD platforms (disclaimer — not regulated by MAS) and ironically not send the money back to the Singapore market! Oh wait, 40% of the millennials in a recent survey are already taking a punt on crypto anyway.

Perhaps it is time to allow the regulated market more free play — known risks can be better contained and scrubbed out. When the Covid-19 clusters involving the chain of rule-breaking KTVs caused an uproar, wasn’t one of the arguments in parliament that the crooks will do it underground anyway?

Let’s blame the bad actors, and not the police doing their utmost to ferret out all the cockroaches. And for the folks who got infected while out buying mangoes, perhaps they deserve to learn their lesson by kneeling on durian shells.

All the ingredients are here

By conventional measures, there’s plenty of wealth that can be put to good use as capital here. For one, Singapore has $4.7 trillion in assets under management. In 2020, GDP dropped by 5.4%. Yet, on a per capita basis, that’s still US$59,798 ($80,232) — the fourth highest in the world after Qatar, Macau and Luxemburg.

As Gan Kim Yong, Minister of Trade and Industry said on Sept 17 during an announcement of a multi-agency initiative to boost the public capital markets: “We have moved mountains to establish ourselves as a global financial hub”.

Numerous catalysts have been planted. They are: Temasek Holding’s Anchor [email protected], EDBI’s Growth IPO Fund, MAS’s Grant for Equity Market Singapore (GEMs) and SGX’s enhanced liquidity programme. We have no excuse to be mired in our lamentations.

However, we need to recognise that a vibrant market has both winners and also losers. We need to speak up and push the envelope in each of our quarters and do so with courage and conviction. If we merely complain and avoid the problem, then we are the problem.

Sure, it is indeed painful when the minority who lose money bring their complaints to meet-the-people sessions. Frankly, more often than not, these people lose more money from scams, mis-sold, or unregulated products than in the stock market.

We must support those in specific need that are vulnerable through education. We need to ensure the safety nets of CPF. And where possible, we supplement through giving our own time and resources. But we will not achieve the hoped-for outcomes for the market by merely managing to the lowest common denominator.

Chew Sutat retired from SGX in July 21 as senior managing director, and member of SGX’s executive management team for 14 years. He serves on the board of ADDX & chairs its Listing Committee. Chew was recently awarded FOW Asia Capital Markets Lifetime Achievement Award in 2021

Photo: Bloomberg

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