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Today,
31 Mar 04
Casinos a safer bet than stock market
by Lee Han Shih
It's been a hot topic ever since Trade and Industry Minister George
Yeo told Parliament on March 13 that the Government might (in other
words, will) allow a casino on the holiday resort of Sentosa and the
Southern Islands.
Even more controversial than the casino proposal is Mr Yeo's subsequent
remark that only Singaporeans who are well-off would be allowed into
the casino, should it take shape, because of the danger of people
of limited means getting addicted to gambling. . This comment irked
many. Some were offended by the elitist tone, while others saw it
as another example of the nanny state at work. In this case, the nanny
state has simply got it all wrong.
The Government assumes that punting in casinos is more risky than
the many other forms of gambling Singaporeans are already addicted
to, such as the stock market. In fact, the Government decided — 20
years ago — to let Singaporeans put their Central Provident Fund savings,
which are supposed to be kept for retirement, into shares.
The result, so far, has been, to say the least, disastrous. Last week,
the CPF Board released its report card on the 20-year-old CPF Investment
Scheme (CPFIS), the scheme which allows members to invest in shares.
At the end of last year, CPF members had invested more than $7 billion
in shares, which, at that point, had a market value of only $4.83
billion. They had, collectively, suffered a loss of $2.26 billion.
Mind you, these were only "unrealised losses" — losses on paper. Add
in the realised losses under the CPFIS, as well as investors' cash
investments and we could find that Singaporeans lost more than $6
billion in the stock market in the last 20 years. That's some $300
million lost each year by investing in shares.
Will Singaporeans lose that much in the casino on Sentosa? Unlikely.
The financial results of other casinos suggest it is rare for a single
casino, or even a few of them collectively, to make a few hundred
million dollars a year.
Does this mean that playing with shares is more dangerous than going
to a casino? No, insisted a stockbroker who pointed out that the CPFIS
loss figures were recorded when the global equity market was down.
"If you measure it when the market is up, the losses will be much
less than $2.26 billion," he insisted. . He is right, of course. The
Singapore stock market rides the global trend.
But it is precisely this that makes it dangerous for the man in the
street to invest in shares in an increasingly global market. With
limited access to information, and — let me be elitist, too — little
understanding of the forces at work, how aware can an ordinary investor
be of the risk of buying shares?
This is what makes casinos a safer bet. A punter can easily find out
the odds of any game. If he loses money in a casino, he does so knowing
that he's gambling.
Can the same be said of the stock market? No. And, what makes it worse
is that the Singapore stock market, while ostensibly requiring listed
companies to disclose all relevant information so investors can make
"informed decisions", is famously opaque. As a rule, companies are
reluctant to disclose information and the authorities are strangely
complacent in allowing them to get away with it.
To top it all, the stock market also works on a system that serves
the bigger clients better than the ordinary punters. In a casino,
the odds are the same for everyone. From this perspective, Trade and
Industry Minister George Yeo is right, in that "only a certain economic
class" should be allowed to gamble. However, the restriction should
apply not to casinos, but to the stock market.
Lee Han Shih is a freelance writer. |
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