And then lost another $320,000 in trading losses - all in three months

Mar 12, 2007
AsiaOne

This Singaporean engineering student made a cool $80,000 in a month - even before he graduated from university.

Mr Chan (not his real name), 27, did not have a job, but earned from betting on the Singapore stock market, picking the shares whose prices rocketed in the recent bull run.

A couple of months ago, his 67-year-old father, convinced that his son had the Midas touch, gave him his whole life savings of $300,000 to invest in shares.

Within three short months of trading, Mr Chan lost about $700,000 - wiping out not only his father's savings, but also incuring another $320,000 in trading losses, The New Paper on Sunday reported yesterday.

The global market went through a sudden meltdown two weeks ago, and The Straits Times Index dived by 75.9 points on 27 Feb and another 127.87 points (the steepest dive in 20 years). In two days, Mr Chan chalked up a few hundred thousand dollars in losses.

Mr Chan was dabbling in high-risk contra trading, in which one buys and sells the same shares within three days. The trader does not have to put down any money but earns the profits when share prices go up.

Mr Chan bought heavily into popular counters such as DBS, UOB, CapitaLand and even China stocks. However, when the market dipped he could not afford to pay and keep all the shares.

Because of the drastic plunge in the STI, Mr Chan had to pay the losses sustained in those two days to his stockbroker. Although the market regained some of its earlier losses, it meant little to him.

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, word has gone around that he is desperate for money as he has already borrowed some $70,000 from 20 of his friends, and now most are avoiding him, said the TNP on Sunday.

His girlfriend of eight years also walked out on him, disappointed by the extent to which his gambling cost him.

His father is prepared to move to a smaller home if needed. Although Mr Chan had thought of filing for bankruptcy, he was told that it would be tough for him to find a decent job after that.

This is in stark contrast to October last year, when he first began trading. His initial success resulted in his friends started calling him Prince Midas.

When Mr Chan returned home, he shared the news with his parents, who were impressed. After role-playing as if he had bought heavily into shares on the STI, he made an imaginary $100,000, and on the second day, another $110,000.

He soon asked his parents if they would like to pool their money, and two days later, his father 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 traded shares of up to six companies, feeling confident that he had diversified.

However, when the first $28,000 loss occurred, Mr Chan lost control and started to panic as his choices no longer seemed to generate the initial gains he had enjoyed.

He began asking his friends for loans, and his girlfriend even applied to four banks for overdraft facilities and maxed the limit on five credit cards.

She was the only one who knew the true extent of his losses.

Mr Chan stopped trading for two weeks, but continued to monitor the charts. In a bid to win his girlfriend and money back, he set his sights on the stocks of nine companies when the market re-opened after the Chinese New Year.

He ended up suffering $100,000 in paper losses and $220,000 in contra trading.

Said Mr Chan: "I don't even know if I have the money to return to the university for my convocation at the end of this month. I can't bring myself to think of what's next."