Forced Errors in trade execution

Forced Errors and unforced errors
Drawing lessons from amateur tennis (which is similar to amateur investing as a losers game),
A forced error is when someone hits a shot that is strong enough to force you to miss your shot or not touch it at all.
An Unforced error is when the player has time to get in position and setup for the shot but still misses. This can be caused by bad contact, timing, shot selection, etc.

Forced Error
My workplace tightened regulations around the usage of broker dealers and I am forced to liquidate and close off my brokerage account in SCB and Poems. This is a huge hit to my existing investment strategy towards a more aggressive allocation to foreign GARP stocks. SCB was my favored custodian for my foreign listed shares, as it has zero corporate action and custody fees which is favored for a buy and hold, while POEMS provide me potential access to China A stocks directly.

The other options my workplace permitted as authorized broker-dealers (UBS and Charles Schwab) are laughable. UBS have zero retail presence, and Charles Schwab are in the midst of exiting Singapore market. It is annoying that despite raising this issue to them, they are adamant about enforcing a broken rule instead of reassessing whether their rules make sense. 

The only feasible broker-dealer that I can use now is Maybank Kim Eng, which has annoying custody fees, which prompted me to liquidate my US positions a few months back.  Although I like the client servicing of MayBank Kim Eng, the custody fees and trade execution fee will erode my returns, to the point that I may need to rethink my allocation to foreign stocks, or choose a ETF approach instead of individual stocks for the majority of my portfolio.

                                                                     What the Heck!

Potential unforced Error
Due to the aforementioned situation, I am at the real risk of incurring slippage cost as I may be unable to reenter the market promptly at attractive prices. I have liquidated all my SCB positions today as the cost of NCBO transfer to Kim Eng is economically unfeasible and not allowed for HK market. 

I am attempting to rebuild my highest conviction position that will not be affected by the US elections / idiosyncratic risks, followed by reinstating the higher beta ETFs / stocks that may be affected by the elections. The heightened transaction costs will definitely eat into my returns and I am still grouchy over that.

Observations about trends in the equity markets

Singapore
Singapore stock market continues to be stagnant and remains my worst performing market. Nonetheless, there is  silver lining in improvement in shareholder disclosure. The new initiative by SGX to allow shareholders to crowd-pool questions to management, and management to disclose their Q and A in the SGX website has been helpful for me. Some of the questions I posted are reflected in the disclosures, and I quite like the new framework the AGMs are conducted.

The influx of discounted brokers (SCB new sign up bonus, Tiger brokers) which are offering zero trading fees is rubbing salt to the wound for constrained investors like me.  The new account openings reported from the various sources I read seem to greatly benefit SGX. I am quite bullish towards increasing equities trading volume in SGX despite the dearth of company listings, and possible derivatives volume from institutionals due to geopolitical risks. 

However, the Singapore banking sector (investment and trading) is increasingly commoditised and hit with yet another headwind. Unlike most retail investors which swears by the banking sector, I am not looking forward to allocate any capital to the banking sector for now.

US market
Despite a large potential recession in the making, the US market is spiraling into speculative excesses while being covered by the Federal Put, and technology / ESG / SAAS companies which are rapidly burning cash and incurring losses are the superstars of the day. The huge amount of capital raising in equity markets reflects the elevated investor sentiment, whom is not deterred by default risks despite recessionary conditions. I believe this is largely a fad and there are very few companies which will actually succeed to grow to its valuation. The highly priced US market is increasingly difficult to allocate capital to and I need to look elsewhere.

A quick browse through the various US ETFs highlighted Tesla, the new entry to the various ETFs. I am rather bullish about Tesla being a legitimate consumer brand , whereby the founder can capture the imagination of the masses, and he has the flair of a second Steve Jobs in the making. Nonetheless, I am not sure whether the incredible founder is sufficient to overcome the horrible margins and challenges of the capex intensive automobile / EV industry.

HK market
My best performing investments are individual stocks in HK/CN market. I noted a trend whereby almost every ETF (including the HK tracker fund) now includes Alibaba and the other tech companies. Although I still have reservations about the flamboyant founder, there is the possibility that I am unduly biased. Certain investors that I greatly respect are bullish about Alibaba and the trends of the eCommerce, and I learnt a lot from them through my communications with them. Instead of being knuckle headed, I will let the ETF make the optimal low cost allocation.

E commerce is an emerging trend but with largely differing operational models and margins. The Amazon / Jingdong model is an infrastructure and heavy capex, low margin model. This is in stark contrast with the EBay / Alibaba , online platform and middleman business, low capex, high margin model.  I have no idea why the different models can continue to enjoy wide discrepancies despite serving the same customer base, or whether the margins will converge in the future.

Conclusion
The US elections and the MSCI re-balancing will no doubt introduce a lot of volatility in the coming weeks. This will introduce a lot of potential slippage in my positions. To put a positive spin on things, this forced liquidation may be a blessing in disguise as I can raise some cash (involuntarily) to capitalize on potential battered opportunities that may arise. Till then, I will be keeping my fingers crossed!