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The Securities Investors Association (Singapore) or Sias was born when a huge speculative segment of the local stock market known as Clob International - on which some 180 Malaysian stocks were traded over the counter - crashed spectacularly in 1998, leading to billions of dollars being lost by Singapore investors.
This occurred at the height of the Asian financial crisis, when the Malaysian government imposed capital controls on the ringgit, declared Clob to be an illegal market and ordered the migration of all Malaysian shares back to the Kuala Lumpur Stock Exchange, or KLSE.
Clob's demise suddenly hit some 172,000 Singapore investors, among them retirees who lost their life savings as they invested almost entirely on rumour, speculation and hearsay, mostly from friends, family members and even acquaintances.
In other words, Clob was a market in which the value of most of the assets that were traded depended on hype, inflated expectations and, at the end of the day, how much the next fool was willing to pay.
Now, a little more than two decades later, we find ourselves reading about the billions that investors worldwide have lost because of the collapse of various cryptocurrencies.
More recently, the bankruptcy of FTX has also hit local investors. FTX was an external cryptocurrency exchange on which the assets that were traded relied on hype, inflated expectations and, let's be honest, how much the next greater fool was willing to pay.
The similarities between the two crashes are striking. In both cases, greed, the herd instinct and the fear of missing out were the main reasons why investors took the plunge. There was no regard for fundamentals in the case of Clob stocks, few had any, while in the case of cryptos, there aren't any.
This story is from the January 01, 2023 edition of The Straits Times.
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This story is from the January 01, 2023 edition of The Straits Times.
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