Investors should trade only stocks on indices for now

I refer to the letter “Benefits of SGX rule to be evident only in longer term” (Nov 20).It looks like retail investors have only themselves to blame for investing in stocks that are now subject to the minimum trading price (MTP) initiative by the Singapore Exchange.

Now that the SGX has clearly drawn a line in the sand, affected investors should, instead of complaining, give this initiative time to be understood fully by all market participants. Meanwhile, investors may do well to avoid affected companies and also companies trading below 50 cents, especially those with weaker or questionable fundamentals, as those types may have a tendency to drift towards the 20-cent mark.

While waiting for the MTP dust to settle, investors, especially retirees, should be encouraged to trade in index-linked stocks such as SingTel, ComfortDelGro and ST Engineering, which tend to hold their value even during times of crisis.

The SGX should consider educational talks for retail investors on topics such as understanding the fundamentals of listed securities and how to avoid investing in time bombs such as the now-defunct Enron.