Saturday 28 February 2015

[Straits Times] Retail investing's decline a worldwide trend

RETAIL investing's decline is not a Singapore-specific issue ("Chance to restore confidence in SGX" by Mr Matthew Kwan Kai En; yesterday, and "Restore lunch break to rebuild confidence in local bourse" by Mr Tng Kim Bock; Feb 12).

Many countries, such as the United States, are seeing a drop in the trading of stocks by the average man in the street.

Instead, the advent and subsequent popularity of exchange-traded funds (ETF) have allowed retail investors to buy into a wide variety of market or country segmented stocks without incurring much brokerage fees.

With the recent introduction of smaller-sized lots for trading locally, this has made the buying of ETFs more affordable.

Brokers thrive on brokerage fees, which are generated by buying and selling of stocks.

As the average retail investor grows more sophisticated, he will realise that day-to-day trading is not much different from gambling, and is unsustainable.

Thus, investing in undervalued, fundamentally strong and regular dividend-paying stocks is a recent sign of growing sophistication among Singaporeans. But with this positive trait comes less brokerage fees being generated and thus, the attrition of brokers.

I doubt the Singapore Exchange and the Monetary Authority of Singapore can do much to change this phenomenon.

Changing the SGX chief executive or reinstating lunch time for brokers will not address what is essentially a worldwide trend. But we can take pride in the higher quality of trades being generated by the more sophisticated Singaporean investor.

Ewe Seow Chie (Ms)