Small investors 'not to be sniffed at'

Jun 17, 2010

RETAIL investors are growing in sophistication, with more of them capable of grilling company bosses. But more can still be done to help them make better-informed decisions.
That is the view of Mr David Gerald, president of the Securities Investors Association of Singapore (Sias) and long-time advocate of investor education here.
In a wide-ranging interview with The Straits Times last week, Mr Gerald shared his views on the local investing scene, and what Sias is doing to ensure it remains relevant.
The former magistrate has been at the helm of Sias, seen as the securities industry watchdog here, since the body was founded in the aftermath of the 1999 Central Limit Order Book (Clob) debacle.
That period has also coincided with a rise in the number and influence of retail investors here. Mr Gerald estimates that they account for about 60 per cent of the total value traded in the stock market.
'So I would say that they are becoming an important player in the market, so don't think they are not and push them to the sidelines. They actually have a controlling interest in the market,' he said, as a warning to companies that underestimate the impact of retail investors.
However, more investors need to make 'timely checks' on the performance and development of companies by engaging the investor relations units, he added.
'Many small investors in the past felt that all they needed to do was to invest in the company, leave it to its management to do whatever they want, then hopefully receive some dividends in capital growth. That should not be the case,' he said.
Knowing what you are putting your cash in is critical, added Mr Gerald.
That belief is one reason Sias has been a key driver of investor education over the last 11 years.
Despite being a non-profit organisation, Sias has held more than 500 educational programmes for some 65,000 retail investors since 1999.
These include online videos and publications on shareholder code of conduct, interpretation of annual reports, fundamental analysis of stocks and even a beginner's guide to investing.
Mr Gerald also set up Sias Research in 2003 to beef up its research capabilities and provide investors with independent and professional analysis on listed firms.
The recently concluded Asian Investment Conference and Exhibition 2010 is one of the newest investor education projects by Sias.
Mr Gerald said that seminars organised as part of this year's event - now in its second year - were attended by more than 20,000 people.
And unlike similar events in the past, which were usually attended by retirees, this year's event attracted markedly younger participants, he added.
'This is a new trend, where younger people are seeking out knowledge and accepting that investing without knowledge is a gamble.'
One of Mr Gerald's key observations in recent years has been that minority shareholders - largely local retail investors - are now becoming more active at annual general meetings (AGMs) in a positive way. These shareholders are not only asking relevant questions, but are also increasingly showing more interest in how a company is run and its overall corporate direction, he said.
'A decade ago, there was a perception that minority shareholders were only interested in what was being dished out at the buffet line, rather than a company's annual report,' he said with a laugh, referring to food and refreshments commonly served to shareholders during AGMs. 'But now, more are holding the company accountable, and asking very searching, in-depth questions, demonstrating their knowledge of the company.'
Helping investors get smarter is behind two other initiatives unveiled by Mr Gerald - the release of a new guide for investors and launching a Chinese-language Sias website within the year.
While funding for such initiatives continues to be a challenge for Sias, it has not stopped Mr Gerald from regularly extending assistance to investors who have found themselves in a bind.
Over the years, Sias has also helped mediate and settle issues between shareholders and firms, thus avoiding costly legal battles. 'Our efforts in dispute resolution have helped to maintain a peaceful investor relations climate in Singapore for the past 10 years,' he said.
As for retirement, the 66-year-old grandfather still shows no signs of slowing down. 'I still come to work at nine and leave at eight every day, and every other weekend, I would still be chairing some seminar somewhere,' he said.