Some time ago, Singaporean investors were perceived to have quite an international outlook. The experienced investors, in particular, knew what they were getting themselves into when dabbling in the foreign markets.
But a few notable events coloured this perception of the savvy Singaporean, says Carol Fong, group CEO of CGS-CIMB Securities, especially the Lehman Brothers minibond saga.
Over a decade ago, some 10,000 retail investors in Singapore lost over $500 million after the American investment company filed for bankruptcy in September 2008.
“I was also involved in the Lehman crisis. Old aunties and grandmothers would come [to me] and say: ‘Look, these are my life savings. Because this whole thing has gone up, I’ve got nothing.’ So, the government stepped in and worked with us to make sure that vulnerable investors were taken care of,” Fong tells The Edge Singapore.
“When you look at failures, we have had some spectacular failures,” says Fong, a three-decade veteran in the financial industry. “Hyflux, a darling of the market — it failed and a lot of people got hurt… I too bought Hyflux bonds. I got out at 85 cents to a dollar, because the writing was on the wall. There were so many signals: they couldn’t pay off the bonds, they were seeing trouble in their P&L [profit and loss statement] numbers.”
See also: CGS-CIMB launches ProsperUs digital investment service for millennials
The pandemic may have minted an army of green traders, but many do not know when to cut their losses, adds Fong. “If you buy a stock saying, ‘I must break even before I sell’, that’s not the right way to do it. If the fundamentals change, you must know when to get out. “If you are a first-time investor, I would say educate yourself first,” says Fong. “Everyone’s in a rush, feeling the fear of missing out — ‘You’re in the game, I’m not in the game, okay I’ll follow.’ But you don’t know what you’re following.”
“Investing is a long game, not a short game; people forget that. They are just in for the thrill. So, please get yourself educated. We are happy to help because we are building a sustainable future,” Fong adds.
See also: Can Spacs and REIT ETFs give the local bourse a boost?
As part of its Vision 2025 roadmap, CGSCIMB’s plans for investor education start in polytechnics. The brokerage will be signing a memorandum of understanding with Republic Polytechnic in January to create a financial literacy curriculum for its students.
“Some might say it’s self-serving, but the age group we are aiming for is [below 18], before they can invest in the markets. It is to teach them the fundamentals of investing early. Before you learn to run, you must learn to walk,” says Fong.
The Monetary Authority of Singapore (MAS), too, sees the value of research and investor education. In September, MAS extended the Research Talent Development Grant, first introduced in 2019, for two additional years. Brokerages like CGS-CIMB can tap the extended Grant for Equity Market Singapore (GEMS) scheme to co-fund the salaries of local or permanent resident equity research analysts at up to 70% over two years.
“For brokerages, there are some good days and some bad. GEMS was quite timely [in 2019], before the markets took off and all the millennials jumped in, when a lot of firms were actually downsizing and letting go of analysts,” says Fong.
CGS-CIMB did not trim its research team, she adds. Instead, they took on fresh graduates. Two years later, CGS-CIMB is looking to do that again. “It takes time, at least six to nine months, to train someone fresh out of university to write research.
“We’ve also committed to both the Singapore Exchange (SGX) and the Securities Investors Association Singapore (SIAS) to write about Spacs [special purpose acquisition company] and de-Spacs,” says Fong. “If we don’t get resources early to train [people], how can we write about these?”
Disruption and differentiation
As foreign online brokerages like Moomoo and Interactive Brokers encroach further into Singapore’s stockbroking space, CGS-CIMB is drawing on its established parentage to differentiate itself from the crowd.
CIMB Group has been around for “donkey years”, says Fong. The Malaysian bank was formed from the merging of various banks, the earliest of which was Bian Chiang Bank, established in 1924 by Wee Kheng Chiang, who also founded United Overseas Bank (UOB). “Everyone knows CIMB is one of the top five Asean banks in the region. The very name itself carries a lot of weight.”
Started in 1979 as GK-Goh Securities, CGS-CIMB Securities is today a joint venture between China Galaxy International Financial Holdings, a wholly-owned subsidiary of China Galaxy Securities (CGS), and CIMB.
“Admittedly, China Galaxy is not so well-known here, but it’s backed by the government in China, with nine million customers and 400 branches. So, again, a strong pedigree,” adds Fong.
For years, warning signs about disruption have been flashing for the stockbroking industry. “We knew as early as 2018 that the traditional brokering business cannot survive in the new world. Robinhood was coming out in the US and gaining a lot of traction. So, we decided to disrupt ourselves,” says Fong.
In March, CGS-CIMB launched digital investment platform ProsperUs — targeted at millennials — offering eight asset classes, including bonds, contracts for difference (CFDs), futures and options.
Compared to new entrants that offer zero commissions on trades over a promotional period, ProsperUs charges a flat fee of US$5 ($6.80) for trades on the American Stock Exchange, the New York Stock Exchange and Nasdaq.
Said Fong at the virtual launch then: “We are actually priced at the low end of the range [of brokerage fees], enough to attract millennials but also to tell everyone that we have a differentiated service.”
Fong highlights ProsperUs’ high-touch service and user experience over trading fees. “It’s a race to zero; once you reach zero, what else have you got to offer? We have a team of 20 client relationship managers just to handle millennials and issues that they may face.”
“I’ve spent 30 years in the industry. We’ve seen brokers come and go. I see many brokers set up shop here in Singapore, close up, then come back again,” says Fong. “What differentiates us is our good reputation and long track record, and we can use capital from our steady income stream to reinvest in the business.”
Sequel to S-chips
With the hesitation surrounding Spacs and one of the quietest years for the SGX in a while, what will it take to reinvigorate our home bourse?
“I think it’s a matter of getting the right [type of companies] and the excitement will come back. I’ve been in the business for 30 years, and see that things that were dead become suddenly and miraculously so vibrant,” says Fong, who is also chairman of the SGX Securities Advisory Committee. “I believe it will happen again.”
As a cornerstone of Singapore’s listings, REITs will always be there, she adds. In fact, the two most recent SGX listings — Daiwa House Logistics Trust and Digital Core REIT — raised 77% of the year’s IPO funds. “But the question is: What else?”
Fong brings up a colourful period of SGX’s history, which she believes is due for revival. “S-chips — it was not easy. I was involved with the first S-chip in Singapore and it didn’t work well. I think we had a P/E of four times, which barely covered. [Most IPOs are priced, at minimum, in the low teens.] But after that, it became a very big thing.”
See: The scandal of S-chips
S-chips are China-based companies that are listed here. Actively pursued by SGX in the early 2000s to revive interest in the stock market, investors saw S-chips as a proxy to China’s economic growth in the lead-up to the 2008 Beijing Olympic Games.
At one point, more than a hundred S-chips were listed here. In 2004 alone, there were 40 such listings.
By the end of the decade, however, cracks had started to appear in the form of dubious corporate governance. Reports of accounting irregularities, loan defaults and missing cash tarnished the reputation of S-chips over the 2010s.
The S-chips sector here is “kind of dead”, Fong admits. “But now, with my Chinese parentage from CGS, I hope to resurrect that.”
“Everything works in cycles, right? There are so many big Chinese companies. Why do they need to list in Hong Kong? We don’t even need the very big ones; even the medium-sized ones are big enough for our market. So, I am going to try and see whether I can bring back the S-chip fervour in Singapore,” says Fong.
“Back to the point about spectacular failures — when you fail, it doesn’t mean that you will never succeed. But the thing is to try again,” she adds.
Fong brings that same tenacity to her own company. As part of CGS-CIMB’s Vision 2025 plan, the brokerage aims to go public by that year. “I’m trying to get my shareholders’ approval to do that. When that happens, hopefully that will excite the market.
“People tell me that stockbroking is a sunset industry; even 30 years ago, they said it was a sunset industry. But look where we are today,” says Fong. “We reinvent ourselves. If we did not reinvent ourselves, we would have gone the way of the dodo.”
Photos: Albert Chua / The Edge Singapore
