TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issu...
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Peter Guy
26 July 2015
Nothing explains a market crash more vividly than the financial behaviour of individuals.
Recent research and surveys revealed some of the unique characteristics of this early generation of mainland investors who are experiencing their first taste of the market thrill of victory and the agony of defeat.
Some of their beliefs and actions wildly contradict each other, raising questions about how to regulate and market to the world’s largest, but most inexperienced, retail investor market.
While each investor has a unique success story about making money, all seem to lose money the same way. While the bubble burst shows how fools and their money are soon parted, maybe the retail investors who bolted in the recent crash were not altogether foolhardy.
Mainland investors are characterised by their susceptibility to following stock price momentum, which feeds their tendency to buy high and sell low. However, there were signs of cautious behaviour, too.
A study and tests of individual investors in China by M&G Investments showed there was a negative correlation between net worth and actual investment knowledge – those with more money to invest actually had less financial knowledge.
“Those investors with a net worth greater than US$15 million consistently overestimated their investment knowledge compared to those with lower net worth,” M&G managing director Andrew Hendry said.
China’s 20 years of uninterrupted economic boom has created first generation wealth whose arrogance and overconfidence can easily translate into trouble at the first sign of easy trading profits.
Ironically, those with a net worth below US$5 million demonstrated more sophistication and a stronger basic knowledge of investment concepts, according to the report. They tend to be humble and ask more questions because they have a lower self-perception of investment knowledge.
CLSA’s analysis of the crash showed it was unlikely to lead to significant systemic risk to the financial system because margin financing peaked at 2 trillion yuan (HK$2.53 trillion), which was only 4 per cent of total retail deposits. However, optimism was unrealistic as at the peak of the market, 54 per cent of investors with four to five years of investing experience were surprisingly positive the market would continue rising in the next three months.
CLSA also found two-thirds of retail investors did not use margin financing and 69 per cent would not alter their margin financing levels. Those who used the most margin lending were high-net-worth clients who qualified for more leverage. So perhaps, the government’s reaction to the volatility was more worrisome than investors’ response to losses.
The M&G report showed the richest people had the poorest knowledge and were highly dependent on investment blogs and online brokers. Financial advisers and private bankers could be relegated to executing trades.
China’s investors are hungry for information. They mostly rely on blogs, websites, social media and advice from friends and family rather than financial advisers. Those most reliant on the internet also have the most exaggerated perception of their own investment prowess and become their own worst enemies for wealth creation.
Across all wealth levels, Chinese prefer to manage more of their money. Mutual funds do not play a dominant role in personal portfolios. Unlike in the US, where only 15 per cent of retail investors primarily invest in stocks and the rest park their money in mutual funds, Chinese prefer to play stocks.
Although the new mainland-Hong Kong mutual fund recognition scheme will allow eligible Hong Kong funds to be sold to retail investors on the mainland, it does not yet allow Hong Kong asset managers to establish and operate their own product distribution and financial advisory platforms. Removing this impediment is a critical reform for raising investment education levels to world standards.
Peter Guy is a financial writer and former international banker