RECENT CRISIS IN THE STOCK EXCHANGE OF SINGAPORE

Mr Jeyaretnam: Mr Deputy Speaker, Sir, may I again say what I said sometime ago that I do not apologize for keeping you and the other Members of this House at this late hour on this matter that I have claimed the right to speak on the Motion for the Adjournment. I did so because of the bewilderment and consternation that swept through Singapore and not only just from the hundreds or thousands of investors but from the public at the complete silence or explanation from the Government on the events that shook Singapore in the first week of December last year. There have been letters to the press, frantic calls to the papers from members of the public asking for information. But not a word from the Government. And so I felt it my bounden duty to raise this matter before this House.

Of course, at that time, I was not aware that the Minister would make a Ministerial Statement. My Party had called for a commission of inquiry into the events and when we saw that there was no reply forthcoming from the Government on our call, we repeated that call a week later. We also suggested that Parliament should be convened so that the Minister may make a statement for the information of the Members and the public. That was also not forthcoming and so I claimed the right to speak on the Adjournment.

When we were told that the Minister was going to make a Ministerial Statement, I thought perhaps it would not be necessary now for me to claim the right to speak on this matter on the Adjournment Motion because the Minister might explain everything. But may I say, Mr Deputy Speaker, Sir, having heard the Minister through, he has not revealed anything. He has not given away anything. The statement has been tight-lipped, as have been the statements of the Government before this.

Mr Deputy Speaker, Sir, the ramifications of the events that led to the suspension of the trading of the Stock Exchange do not concern just the simple failure of a public listed company. It goes far beyond that. About the time that the Stock Exchange was closed, I happened to meet a man who should know about the operations of the Stock Exchange and the market and he summed it up all in one word. He said, "It is all plain greed." Greed on whose part? Greed on the part of some stockbrokers. And, of course, from what we now know, it is quite clear that the debacle was the work of a group of unscrupulous manipulators, aided and abetted by a small number of equally unscrupulous and greedy stockbrokers.

So here we have a group of people who, it would appear, deliberately went about to bring the market to the verge of collapse, giving full rein to their greed. And what they did precipitated unprecedented monetary loss, hardship and mental anguish to thousands of our small shareholders.

The magnitude and seriousness of the problem, Mr Deputy Speaker, Sir, must be seen in the fact that nearly 20% of the total market capitalization was wiped out. The Minister tries to minimize the damage that has been done to Singapore and to its chances of becoming a financial centre. I thought that was the declared aim of this Government, that Singapore should become a financial centre. But here we have what has been described as a crippling blow delivered to these efforts. The Minister seeks to minimize these, as I said, but if the Minister thinks that a 20% loss in the capitalization is not something to lose sleep over, then I do not know what is the loss to Singapore over which he would lose some sleep.

Mr Deputy Speaker, Sir, the Stock Exchange was closed. Did the MAS decide on the closure of the Stock Exchange? In the programme "24 hours" broadcast over the BBC, a commentator, on being told that Singapore had close its Stock Exchange, commented that it would appear that whoever was in charge had lost his cool, or was panic-stricken. He commented that even during the Great Depression the Wall Street Exchange did not close. He said that this must result in investors all over the world losing confidence in the ability of the Singapore Government and the authorities to manage Singapore's financial affairs.

The Far Eastern Economic Review, in its issue for the 19th December, 1985, said that the suspension had put Singapore damagingly on the map. People who had not known of the Stock Exchange of Singapore knew now about it.

The Wall Street Journal called it a body blow to the efforts of the Singapore Government to establish itself as a world financial centre.

The Financial Times said there would be unhappiness abroad at the way the authorities had tolerated the stockbroking practices which lay at the heart of the crises and failed to monitor the lending activities of the banks.

So these financial journals were expressing their amazement that the authorities in Singapore had allowed this to happen.

There was a startling revelation in the Minister's Statement, and that is, that the Stock Exchange Committee was self-regulating and therefore the MAS did not wish to interfere too much but allowed them to carry on. He said that the MAS was aware of forward contracts as early as February or March, 1985, referred it to the Stock Exchange Committee and asked them to look into it. I asked him whether there was a member from the Monetary Authority of Singapore sitting on the Stock Exchange Committee and his answer was that there was not anybody. But there is, Mr Deputy Speaker, Sir, in the present Securities Industry Act a provision which says that the Minister may establish an advisory body to advise him on matters relating to the Securities Industry. And on this body persons from the business community, the Government and the Monetary Authority should sit. What is important is that this advisory body has the power to inquire into any matter or thing related to the Securities Industry. So was there an advisory body or consultative body existing? If there was, did it exercise the powers given to it by subsection (2) of section (3),

'to enquire into any matter or thing related to the securities industry and for this purpose may summon any person to give evidence on oath or affirmation or produce any document or material necessary for the purpose of the enquiry.'

What was the MAS doing? I think the people of Singapore have to be told.

Mr Deputy Speaker, Sir, I have not got very much time. But one of the things, the cornerstone of a democratic government, is the accountability, the accountability of the government or the Administration to the people. The government must accept responsibility. The government must answer to the people. How has this Government discharged its duty of being accountable to the people for what took place in the first week of December?

The Government sent a civil servant to answer the questions. He held a press conference on the 4th December. Mr Deputy Speaker, Sir, that press conference was to no avail in answering any of the questions that the public wished to know. I could read the report on that press conference as published in the Straits Times of 4th December as it makes very interesting reading. Mr Pillay has asked whether he would name the bad guys, the bad stockbroking firms, and he says, "I leave it to the stock exchange to reveal their names." Silence from the gentlemen on his left. Then he was asked, "Wouldn't you think it was a matter of public interest?", the journalist tried again. Mr Pillay: "You've got a point. We'll take it into account." So the journalists press on. They were trying to discharge their duty to the people. They asked, "So why should one company's failure lead to such a colossal collapse of the whole system, bringing about the unprecedented suspension of all trading?" The expected question was asked. "Yes," Mr Pillay says, "that's a question on everybody's mind." And he turned to the brokers for an answer. It shows a complete incompetence of the MAS. May I tell the Minister - I am sorry I have to say this - I know he did not take up the Minister's post until sometime in the middle of last year. May I tell him that he should not have sent a civil servant to chair the conference. He should have attended the conference. That is all what Ministerial responsibility is about. I am sorry to have to preach to this Government, but it would appear that the Government is not aware of Ministerial responsibility.

Civil servants are not there to take the responsibility and to account to the people. They are there to carry out the policies decided by the Ministers, by the politicians. So I say to the Minister that he should have attended this press conference. I am sorry to have to say this but public accountability, Ministerial responsibility, requires that the Minister should resign if he does not discharge his functions and accepts his responsibility for what has happened.

Mr Deputy Speaker: Mr Jeyaretnam, you have one minute left.

Mr Jeyaretnam: Mr Deputy Speaker, Sir, I want to know what is the great obstacle to the appointment of a Commission of Inquiry? As was said by a letter to the Straits Times on the 7th December, 1985:

'Nothing must be swept under the carpet or foreign investors will simply go elsewhere.'

This man is crying out for full information. Mr Deputy Speaker, Sir, here we have a situation where some millions of dollars have evaporated and the Government refuses to hold an inquiry. The Government refuses to account to the people. I ask that the Minister should recommend immediately to the Cabinet in discharge of its responsibility that a Commission of Inquiry be appointed so that we know why the MAS has failed completely.

Mr Deputy Speaker: Order. Mr Jeyaretnam, your time is up.

Dr Hu Tsu Tau: Mr Deputy Speaker, Sir, I have always been considerably impressed by the oratory of the Member for Anson, except in this instance I find that his speech on this subject 7207consists of 1% substance, about 95% meandering, and 4% of hot air.

The issues undoubtedly were important but they should not be taken out of context in terms of the size, the impact and seriousness of Singapore as a financial centre.

Let me deal briefly with his vast sweeping statements in saying that millions of dollars have been wiped out from the Stock Exchange capitalization. I think this is an extremely naive and simplistic way of looking at prices on the Stock Exchange. I think he is referring to the one-day loss when prices dropped upon opening. I think he should realize that most of these have been recovered. So where it has evaporated, it has congealed again.

Prices in the stock markets move every day and it is in the nature of prices of stocks that they fluctuate. As an example, it is reported today that the Dow Jones (US Stock Exchange) fell by its largest single-day drop since 1929. In the process, due to a statement made by an Investment Counsellor, $40 billion was wiped off the value of shares on the New York Stock Exchange. Is that a real loss? By that standard, the fluctuations which have taken place over the years in the Stock Exchange of Singapore will have wiped out billions of dollars and recovered equally billions of dollars within a short time. So it is extremely naive to look at price changes over one day as wiping out the underlying assets, which is what we should be looking at. For those who may have sold on the day in question, indeed if they had sold and lost some money, this was unfortunate. But many who sold could equally have made some money except they probably did not make as much as they would have hoped to if they had bought considerably below the market.

In fact, the realistic way to look at prices on the Stock Exchange is how the international investor values it, and one of the most important criteria is the price earnings ratio placed on shares by investors, both domestic and international. Even at current day prices, with the Straits Times Industrial Index standing at about 640 today, the valuation placed by international investors and the investors in general still place an average price earning ratio of 21 for Singapore stocks compared to an average of 17 in Hong Kong, 25 in Japan and 13 in the United States. So confidence in the value of our companies' assets has not evaporated by any means. Fluctuations do take place.

I think I have already talked about this in my ministerial address. Perhaps I should explain to the Member for Anson that a self-regulatory system, as practised here and until the change in the Securities Industry Act and as practised in the United Kingdom, places full responsibility on the Committee of the Stock Exchange to manage its own affairs. The MAS has no legal powers to enter into or inquire and demand information, and that is the defect we are trying to rectify by the new Act.

Mr Jeyaretnam: On a point of clarification.

Dr Hu Tsu Tau: I am not giving way.

Mr Deputy Speaker: He is not giving way.

Dr Hu Tsu Tau: I am answering for your benefit now. There is an advisory body provided under the Securities Industry Council in which MAS is represented. That body's sole function, in fact, is to advise the Minister on new listings of companies. It also advises the Minister on administration of the Code on Takeovers and Mergers on stock exchange matters. If the Member for Anson wants details, we can give him facts which clearly establish that MAS has no powers which we would like to have and which are embodied in the new Securities Industry Act.

Under a self-regulation system, the Stock Exchange Committee makes its own decisions and consults the MAS on these decisions on matters of importance because it is a regulatory body for the financial system. As far as the suspension of the Stock Exchange was concerned, the decision was taken entirely independently by the Committee of the Stock Exchange after consulting with MAS and the banks.

Mr Jeyaretnam: You gave your consent?

Dr Hu Tsu Tau: Yes, I gave the consent simply because it was clearly impractical to insist that the Stock Exchange remain open when they clearly were not able to do so. I think that does not require a lot of logic. If we had insisted that the Stock Exchange remain open in the circumstances, does the Member for Anson believe that the prices would not have dropped? I believe that the prices in fact would have dropped twice as large.

Mr Jeyaretnam: Did he pre-empt a dropping?

Dr Hu Tsu Tau: Of course, not. [Interruption] But that was due to market reaction, logical or otherwise, and in a few days' time the drop was recovered and, in fact, in the process of the last few days, a good proportion of this so-called loss which the Member for Anson has mentioned has been largely recovered. I do not wish to go into the intricacies of what stock market movements mean but I think most people who are knowledgeable will understand.

As to the statement made by the Member for Anson about foreign loss of confidence, he is quoting from the BBC, the Far Eastern Economic Review, Financial Times, commentaries which suggest that the closure of the stock market in Singapore is an unprecedented tragedy of unprecedented scale. As I said earlier, investment by foreigners in our market is relatively small. Therefore, by no means, does their withdrawal of confidence mean all that much, as I have said earlier. Secondly, as to the question about the unprecedented nature of the closure, I would like to say that if it is decided that in the interest of the public in general that the stock market should be closed for two or three days in order to ensure that a proper regulated market guaranteeing the trades of all investors could be achieved after that, the decision to close, I think, was a wise one.

Mr Jeyaretnam: But it was not conveyed in the press conference.

Dr Hu Tsu Tau: In fact, it was declared at the press conference that all trades were guaranteed. Rather than issuing grandiose statements about boosting market prices and encouraging people not to sell which is manifestly useless because the market is not going to believe you anyway, it was considered vital that the mechanism was put in place to ensure that no panic took place. [Interruption]. Would you please not interrupt? It was clearly a priority to ensure the mechanism was put in place to ensure that there was no panic and that was MAS' priority and it was also announced in the press conference on that day.

Mr Jeyaretnam: It wasn't.

Mr Deputy Speaker: You have one minute left, Dr Hu.

Dr Hu Tsu Tau: On the question of precedents in closing of markets, I would like to mention that the London Tin Market has been closed now for several months. No one has suggested that - and that is a very large market -London as a financial centre has been dealt a death blow. Similarly, the Silver Market in the United States was closed for some time because of the silver crisis. Again a pragmatic decision taken to prevent chaotic conditions developing in the market. So whether we have created history or not, I think, is unimpor- tant. The more important issue is that the market should be stabilized and this is exactly what we did.

The Question having been proposed at Twenty-three minutes to Nine o'clock pm and the Debate having continued for half an hour, Mr Deputy Speaker adjourned the House without Question put, pursuant to the Standing Order.

Adjourned accordingly at Seven minutes past Nine o'clock pm Sine die.

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