Thursday, September 25, 2008

On Naked Short-selling ( Letter to Forum)

September 24, 2008

Dear Editor,

I applaud Singapore Exchange’s (SGX) latest ban on “naked” short-selling of shares.

This unreal practice has been tolerated for too long and this restriction, which is long overdue, will help to weed out unhealthy speculating.

“Naked” short-selling occurs when one sells a stock that one does not own in the hope of pocketing a profit when the stock is bought back after its price has fallen.

In the real world, you and I do not sell a car nor a house that we do not own, do we?

For those caught with their pants down, I hope that this serves as a reality check.

Dr.Huang Shoou Chyuan

6 comments:

InSpir3d said...

Dr Huang, who died and made you the expert on short-selling?

Your comments are sweeping statements and betray a poverty of understanding of the utility of short-selling in maintaining the integrity of the financial markets.

Short selling makes an important contribution to the market. It provides liquidity, drives down overpriced securities, and generally increases the efficiency of the markets.

Short sellers are often the first line of defense against financial fraud. While the conflicts of interest from investment banking keeps some analysts from giving completely unbiased research, work from short sellers is often regarded as being some of the most detailed and highest quality research in the market.

Short sellers actually help to prevent crashes because they provide a voice of reason during raging bull markets.

Dr Huang, I suggest you stick to your circle of understanding and refrain from pontificating on finance.

nofearSingapore said...

Hi inspir3d,

The wonderful thing about blogging is that I can post anything I want, esply if it is my own blog.

No one is forced to read my stuff and I am surprised that you take so much trouble to compose a lucid and possibly quite reasonable response.

Since I am not an expert I must assume that what you wrote must be true.

Yes all of us should leave experts like you and your type on Wall Street to make sound financial judgements so that the world will be a better place.

Actually I wanted to ask you to do a physiologically impossible task, but I realize that perhaps there may be some school-children reading my inconsequential blog, I decided against it.

Don’t tell me where you blog at- I won’t be able to understand the stuff you write since I am so stupid and you are so smart.

Anonymous said...

Another layman in me joining the fary by saying that investments in stocks and shares have evolved into a form of gambling. Gambling is whatever the Laws allowed for games of chance.

Naked Short-selling was legalised and now 'de-legalised', but there is no guarantee that it will not be resuscitated later.

patriot

Anonymous said...

Oops!

My apology, 'fary' should read as fray.

patriot

Game1980 said...

short selling is good as it help to make prices more realistic.
Never borrow to buy stocks as prices are go up, stay the same or go down.
As drs we are too nice and often get eaten up but it is a dog eat dog world in finance.
Take care!
Dr Ang Yee,Gary

Anonymous said...

hahah "Actually I wanted to ask you to do a physiologically impossible task, but I realize that perhaps there may be some school-children reading" . I like a doc with a funny bone.

Actually, inspired is a nice bloke coz I met him before. Altho what he said is true, but tone is kinda condescending.

Cheers,
The Joker