It does bother me to know that Brunei will be the last country in ASEAN without a Stock Exchange. With Laos launching its first floor trading at its newly built LEX on 11.1.11 and Cambodia following suit, I am somewhat taken aback by the thought that a LDC country and a new comer to ASEAN have built their own stock exchange of their own. Of course one of the main objectives of having stock exchange is access to capital as companies floating their shares at the stock exchange can be bought and sold by members of the public. But to a country, having a stock exchange can really contribute to a more sustainable economic growth of a country as well as a more transparent management of corporations, ensuring security and returns for investors. Just look at South Korea as a very good example. Strict corporate governance and accounting practice must be adhered to by companies before they can IPO (Initial public offering)their shares as the public has the right to make informed decisions whether to invest in the companies or not. It can also encourage a saving and investment culture in the population especially in a country where we tend to spend more than we earn.
Some of us may have the idea that having stock exchanges may encourage speculative behavior on the buying and selling of shares which is akin to gambling and of course prohibited in our religion. But is it really gambling? I do not think so. Otherwise countries in the middle east like Saudi Arabia, Bahrain, Kuwait just to name a few would not have one of their own.
To the nay sayers, let me just lay out why investing in shares or stock is not gambling. For a start gambling is always a zero sum game. The gambler has only two choices. Either win or lose his money. Whereas investing in shares, the investor can get the middle and long term returns if he can manage his risks carefully. If you are risk averse like me, instead of buying individual stock or shares from a single company, you can buy unit trust which is basically a basket of shares from many companies so that you can spread your risks better. Just think of it this way. Imagine you have 12 eggs (which is your investment). If you carry all these eggs in a single bag and accidentally drop the bag, the risk of you breaking all the eggs would of course be higher than if you split the eggs say into 4 bags and ask 4 different people to carry them. These unit trusts are managed by professional people who are in the know of the business. Of course there are regulations and laws that govern these people who manage your investment.
Second, to a gambler to win, it is a complete game of chance. He has nothing but wish and pray that he had that chance or stroke of luck. To those who buy shares, we need to study and assess the performance of the companies. We need to assess all the available information, the business climate and the confidence of the market. Many factors can affect the price of shares knowing these can help you make the decision to buy or sell the shares. Just think of it this way, if there is going to be a long hard winter in Europe, you can be sure that there will be higher demand for energy. So companies providing energy such as oil companies will need to sell more oil. Obviously if there is more demand than supply, the price will go up and that means these companies will make more money which also mean that the shares of the companies will become more valuable.
Third, if you gamble, in the long run you lose and the gambling owners will be the clear winners. otherwise Las Vegas or Macau would not have flourished as the gambling haven on earth. On the other hand if you continually buy stock either through unit trusts or individual shares, despite the price fluctuations on your holding, you will eventually accumulate wealth. Yes there will be hiccups, black mondays, financial crises and what have you but if you hang on to your stock, you will still have assets. When you buy shares in a company you are actually a proud owner (or at least one of the owners) of that company. I started learning how to buy shares when I was still a teen kid in the UK. That was the time when Thatcher the Iron lady, my favorite UK PM, pushed for the privatization of a number of their public companies like British Telecom and British Gas. With the little savings I had, I bought a few shares in the British Gas and British Telecom. I kept them, although the dividends payable were very little but as soon as I left UK after 5 years, I sold them and made a handsome profit as the shares increased in value.
Right now the only publicly owned company in Brunei is the IBB Bhd. To start a stock exchange, it is obvious we need to have big companies or Government linked companies that are willing to offer their shares to the public. Alternatively, we can look at the privatization of the key public utilities such as water, roads, electricity, ports and the list can go on. Obviously there are downside to privatization. For one, we will need to pay more for the services rendered as these publicly traded companies will need to make money in order for the shares to be attractive to the investors. But of course the upside is a lot more. Otherwise, countries in the world would not have been scrambling hard to establish their very own stock exchange.
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