Monday, April 01, 2013

Why Is Retail Investing Lacking? (Part II)

Posted the other day: More On Bursa CEO Pay And Lack Of Retail Investor...

Consider the following.

You hear these advice always. Invest and don't punt. Invest long term. The longer you hold the stock, the better your investment return. When the stock falls, just buy more. Same investment is now cheaper, invest more!

Now consider this story.

You read about the company venturing into another country, just when that country is announcing some interesting projects. You get optimistic about the company, right? Analysts are optimistic too.

So you invest in it.

Then came another opportunity.

Company announce a share split plus rights issue.

Rights issue can't be that bad, right? Especially when the company is now having hot new project in another country. Times are exciting and the company 'invites' you to invest more money into the company by subscribing to the rights issue.

So you decided to invest more, more so since you noted that the company was also buying back their own shares.

The company shares meanwhile started to announce weak set of earnings. Stocks started to decline.

7 months after you had subscribed to the rights issue, the stock, due to continued weak earnings, fell to its historical lows. The owners of the company too agree that the stock was cheap. So cheap that  they decided to privatise it!

Now get this.

Your cost of shares after the rights issues was 6.25.

The company privatisation offer was a very generous 2.60!!!!!!!


Now seriously you tell me, who in the right mind want to be a retail investor when incidents like this occur? And to add serious salt to your injury, last year, the local business papers suggested the company was planning to relist its shares again!!!!


Isn't this delisting and relisting giving the stock exchange such a horrible stench?

And you know very well, since the stock exchange is a listed entity, it is a business and as a business, the business will most likely allow the relisting because such exercise will generate revenue for the stock exchange.

But at what cost?

You tell me....

So if retail investors shun our stock exchange, can you really blame them?

And oh, this story is real. This incident did happen.

See and

This chart says it all...

 And this is the link about the possible relisting...


Think about it.

When you see incidents like this happen in our stock exchange, won't it scare away retail investors?

My point again?

Let me paste what I wrote in my last posting.
  • Bursa, remind yourself you are a stock exchange. Look after the exchange. Make sure you protect your other customers, the minority shareholders, fairly. That's the most important thing. Who wants to invest when they run the risk of being treated unfairly and not being compensated for taking the risk to invest their hard earned money in shares? Once the protection is there, slowly but surely, the retail investors will flow back into the market.


M.A. Wind said...

And the IA? "Fair and Reasonable, Accept".

That was the time when almost every single IA was not worth the paper it was written on.

It took BM and SC more than 10 years to finally get some improvements in the quality.

And now IA dare to write that the majority of the deals are not fair. Wow, what a surprise!

Moolah said...

It's a step in the right direction but it's not enough.

What we have now doesn't make things any better.

Only in our stock exchange where people are advised that offers that are not fair is reasonable to accept.

Where's the logic behind such advice?

Unfair is unfair.

How dare they call an unfair order reasonable to accept?

kine said...

Stock market is for any company to make big buck out from the fool of all the majority of shareholders. They need to sell/distribute at very high price to the very greedy & excited investing public & collect/buy at the very damn dirt cheap price through buy back from their short selling activities or forceful privatization at the expense of the very ignorant public.
This is the very uncomfortable harsh reality of true life.

PureBULL said...

U should rightfully get the pay rise not the good for nothing bursa ceo who is paying himself $2 mill pay rise in a year to wow $5.5 mill p.a. Simply 1st class robbing.