Article from New Paper in 2007:
BURNT BY
STOCKS
I LOST $700,000 IN 3 MONTHS
Student on winning stock market streak, then
he loses dad's life savings
•
OCT LAST YEAR: Just a student in Australia, he makes $80,000 from
trading
• DEC LAST YEAR: Back in S'pore after exams, he role-plays trading
& makes an imaginary $100,000 on 1st day & $110,000 on 2nd
day
• DEC-JAN: Convinces dad to give him life savings of $300,000. But
he loses it & the $80,000
• Feb: Girlfriend dumps him. He stops trading for 2 weeks.
• FEB: He puts money on stocks of 9 companies when market reopens
after Chinese New Year
By Maureen Koh
12 March 2007
EVEN before he graduated from an Australian university, this
Singapore engineering student earned $80,000 in a month.
Mr Chan (we are not giving his full name to protect his identity)
did not have a job.
The 27-year-old was betting on the Singapore stock market, and
managed to pick the shares whose prices rocketed in the recent bull
run.
Buoyed by the success, his father was convinced that his only son
had a Midas touch. So, the 67-year-old former sailor, who runs a
shop selling women's clothes in Chinatown, gave his son $300,000 -
his whole life savings - to invest in shares.
That was a couple of months ago.
Today, Mr Chan has not only lost all his father's savings, he has
incurred another $320,000 in trading losses.
When the global market went through a sudden meltdown last week, so
did his luck and fortune.
EVERYTHING BOMBED
In just two days, Mr Chan chalked up a few hundred thousand dollars
in losses when The Straits Times Index (STI) dived by 75.9 points
on 27 Feb and another 127.87 points (the steepest dive in 20 years)
on 28 Feb.
He said: 'Everything bombed in just 48 hours. My life, my future...
and now, even my parents could lose their home.'
In three short months of trading, Mr Chan has lost about
$700,000.
Although the market has regained some of its earlier losses this
week, the recovery means little to him.
Mr Chan was dabbling in high-risk contra trading, where you buy and
sell the same shares within three days, putting up no money and
earning the profits when share prices go up. But investors can lose
money when the stock market is having a downturn, and they will
have to pay the losses to their stockbrokers within days.
Mr Chan bought heavily into popular counters such as DBS, UOB,
Capitaland and even China stocks such as Longcheer Holdings, and
hoped to sell them for a gain before the usual deadline.
But as the market dipped suddenly and he could not afford to pay
and keep all the shares, he had to make up for all the losses he
incurred during his trading period.
Even after exhausting his previous winnings, his father's savings,
and loans from friends, he still owes two of his remisiers more
than $200,000.
To add to his woes, his girlfriend of eight years has also walked
out on him, disappointed by how his gambling had cost him
dearly.
Most of his friends are also avoiding his calls or finding excuses
not to meet him. Word has gone around that he is desperate for
money because he has already borrowed some $70,000 from 20 of his
friends.
Mr Chan said: 'No one can blame them for avoiding me. Thankfully, I
still have my parents on my side, otherwise I'd probably have gone
insane.'
To help him, his father is prepared to move to a smaller home if
needed. While the family is scrambling to raise the money to clear
the debt, Mr Chan admitted he had entertained thoughts of filing
for bankruptcy.
He said: 'I was told if I did that, it'd be tough for me to find a
decent job.'
During the interview with The New Paper on Sunday, Mr Chan became
rather agitated and restless when he related his problems. 'Look,
it's fine if it's just me, but I've got to think of my parents,' he
said.
This is a far cry from October last year when he was preparing for
his final-year examination in Perth.
At a group study session, one of his Singaporean classmates checked
on his own trading account and shouted happily when he made a few
thousand dollars.
Mr Chan recalled: 'I was hooked from the minute he started talking
about how easy it was to make a profit.
''He encouraged me to do likewise and even suggested that I start
off with contra trading since I didn't have much cash.'
Mr Chan then contacted a cousin, who had an online trading account
in Singapore, and asked him to buy some shares he selected.
He said: 'I made $23,000 by the end of the first week and my
friends started calling me Prince Midas.
'I guess I sort of got carried away when I made another killing of
about $30,000. I got bolder and by the time I stopped because of
the exams, I was richer by $80,000.'
Mr Chan returned to Singapore in early December after his
examinations and shared the news with his father and 58-year-old
mother. They were impressed with his 'windfall'.
Still, he insisted that it was not the 'easy cash' but boredom that
got him trading again.
He said: 'I wanted to take a break for a couple of months before
looking for a job, so I was idling during the day when my parents
and my girlfriend were at work. 'I was surfing the Internet when I
decided to check out the SGX homepage. I randomly picked a few
companies and the chart pattern I saw was definitely
encouraging.'
He started to monitor the shares, and role-played as if he had
bought heavily into them.
When the STI closed on the first day, he had made an imaginary
$100,000; on the second day, it was another $110,000 'win'.
'I was, like, geez! If only I had dealt in real money. Then it
occurred to me, maybe this is my calling. If I were good, I could
afford to let my parents retire comfortably, have a lavish wedding,
and upgrade my Honda Civic.'
Over dinner that night, Mr Chan shared his plan with his parents
and asked them if they would like to pool in their money.
He said: 'My father told me, no risk, no gain.' Two days later, the
senior Mr Chan transferred $300,000, his whole life savings, to his
son's bank account.
Flushed with cash, Mr Chan was able to open trading accounts with
three stockbroking firms. He was so focused on his new
'responsibility' that he 'ate, slept and breathed stocks'.
From analysing companies' chart patterns to buying stocks after a
fall, Mr Chan traded shares of up to six companies at one go.
'I thought I was so smart to diversify... you know what they say,
never put all your eggs into one basket,' he said.
But when he registered the first negative return, Mr Chan 'freaked
out'.
'I felt it should not have happened because people were making
money.'
The $28,000 loss was just the beginning of his nightmare. He said:
'I lost control. I could not afford to lose the money. My family
does not belong to the high-income strata.'
His confidence level dipped further when he kept picking 'the bad
eggs'.
As his stocks dipped further, he started to panic and began to ask
his friends for loans.
To help him, his girlfriend applied for four bank overdraft
facilities and even maxed the limit on five credit cards.
She was the only one who knew the true extent of his losses.
Mr Chan said: 'I couldn't tell my parents. But my girlfriend was
there for me... until she could not take it anymore.
He covered his face for some seconds and said quietly: 'I've let
her down. Really.'
In his bid to win his girlfriend and his money back, Mr Chan said
he stopped trading for about two weeks, but continued to monitor
the charts.
Hoping to recover some of his earlier losses, he set his sight on
the stocks of nine companies when the market re-opened after the
Chinese New Year.
But Mr Chan ended up suffering $100,000 in paper losses and
$220,000 in contra trading.
He said: 'I went in for the kill, only to find I could barely stay
alive less than five trading days later. My loved ones may now have
to 'die together' with me.'
He added: 'I don't even know if I have the money to return to the
university for my convocation end of this month. I can't bring
myself to think of what's next.'