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Old 24-06-2012, 02:29 PM   #818
Sinkie
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I dunno, I think contra's a terrible idea, and the sooner it dies the better. It's pretty much an abuse of the T+3 settlement system.

It's bad for the brokers, because they're handing out interest-free loans instead of being able to charge interest on margin loans. It's bad for the exchange, because it cripples the development of derivatives markets and stock lending (because you don't need to borrow stock to be able to short it via contra). And it's bad for investors, because it gives them infinite leverage and thus infinite capacity to blow themselves up.

In fact, I'm having trouble thinking of anyone it's good for.

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I guess the brokers and the SGX are terrified of the collapse in volume that'll happen if they ban contra trading. (Is it really 70%, though? Contra's a retail thing, and there's no way the SGX's volume is >70% retail muppets.)

(And I doubt the STI would drop that far - or at all. Contra trading's a short-term thing, so it's not like people are holding huge long-term buy positions that they'd have to close out; and I'd imagine contra volumes are pretty much equally balanced between buyers and sellers... so if you ban contra, the net result would be pretty much a wash.)
Usually in sgx, there's 3 groups of traders providing liquidity and volatility; funds, proptraders (traders+Remiser+hedge funds) and the retailers traders (uncle/Aunty/students/sme's bosses etc)

Funds may or may not contra, the 2nd, 3rd groups are where the contra volumes comes from.. Hold 5 days with no need for margin or financing cost..

Imagine no contra, they have to cough out $35,000 margin to hold a $100,000 intraday position etc

So when contra extinct, see only the funds and retailers playing with price moving in a very huge range or else will be selling driving price down due to lack of buyers.

Then probably one will see many stocks in sgx moving likes jardine or diary farms..

But it will be good one will really see how our local stock market will really reflect on our locals income growth ($3000) as well

But just my assumptions..

Contra is like nuclear weapon, know how to make use of it, but it will destruct anyone who abuses it.. Stay away from it if one have no expertise to handle it

Last edited by Sinkie; 24-06-2012 at 06:46 PM..
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