Friday, May 19, 2006

Local listed companies dabbling in the share market!

Dedicated to boyplunger.

I do strongly agree with you that investors should be very prudent if they see the listed company dabbling in the share market.

When we see 'marketable securities' in the balance sheet, we, the minority investor is really at risk for the following reasons:

1. what types of marketable securities are we talking about?

The term marketable securities is simply so vague. So what kind of marketable securities are we talking about?

Bonds? What kind of bonds? What if it is a junk bond that is tanking?
Unit trusts? What kind?
Stocks? What kind of stocks? Investment grade stocks or speculative stocks?

2. Who is making the investing decisions?

Fund managers? Who? And what sort of investments are we talking about?
Or are the management/owners on a DIY? That's even worse. What divine skills do they have?

3. Transparency.

There is simply no transparency involved, and everything is simply based on blind faith that such investments should generate some sort of income. And there is no way the minority investor can be sure if the management/owner of the listed company is abusing the company's funds to buy shares in another listed company for personal vested interests or reasoning.

4. Management focus.

Once they dabble in the stock market, the management/owner focus is being diverted. How could the minority investor expect the management/owner to remain focus on the core business when they are burdened with the extra responsibility of ensuring good results from their investment?


Anonymous said...

Who care ? It is the other people money & must be fully maximised 2
obtain max. profit. 4 own benefit ????
Do u think your money in bank/EPF that
the banker/fund manager never use it 4 other purpose ??? All is revolve on this word call confidence. If everybody lose that confidence look what happen 2 MBF during 1997 !!!