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Wasteful to analyse money lost because of SGX rule

The minimum trading price rule by the Singapore Exchange is market-neutral. If companies consolidate their shares, the theoretical post-consolidation price should be the same as its pre-consolidation price (“Analyse how much lost by minimum trading price rule”; Oct 29).

Vincent Khoo Teng Lau

The minimum trading price rule by the Singapore Exchange is market-neutral. If companies consolidate their shares, the theoretical post-consolidation price should be the same as its pre-consolidation price (“Analyse how much lost by minimum trading price rule”; Oct 29).

The market may have a different view, and in practice, post-consolidation prices go up as well as down. This has nothing to do with confidence in SGX or its reputation, but rather with market participants’ view of the particular counter.

Therefore, it is unnecessary for the Monetary Authority of Singapore or the SGX to analyse how much money has been lost or gained because of the rule. It is a waste of resources to pursue this irrelevant exercise.

The reason share prices fall, consolidation or not, is simply that smart investors know that those stocks have poor fundamentals and weak prospects. Otherwise, those stocks are bargains.

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