Asked by Anonymous

If a group of millionaires decided to buy $5million worth of shares monthly + regularly for a particular company. 1. Will you buy the shares? 2. What will happen to the share price? ?

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  • Isaac Chan
    Isaac Chan, Finance at NUS Business School
    Top Contributor

    Top Contributor (Apr)

    Level 7. Grand Master
    Answered on 13 Feb 2019

    Here’s a quick response to your answer.

    Will I buy the shares? Not necessarily. Simply because millionaires decide to buy the shares does not mean that you should do it as well, since they may not be good investment decisions.

    Rather, you need to determine what would be an appropriate strategy for you, which depends on your investment goals, such as how long you want to hold an investment, or how much risk you are willing to take on. Your goals therefore should be your guiding principles in terms of your investments. However, you did present an interesting scenario here. If I were you, I would probably investigate if these shares are currently being undervalued, and if the share prices will increase over time, before making an investment.

    Share prices are always affected by the forces of Demand and Supply. If there is more demand than supply, then share prices will go up, and the converse will happen if demand is less than supply. Hence, we would need to analyse both demand and supply forces before forecasting whether share prices will go up or down. However, if in the scenario you provided, only demand for the shares increased by the purchase of shares by the millionaires, then share prices will go up if supply is constant.

    Comments (1)
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    • Question Poster
      Thank you for your reply. Will there be anything you would add if we are talking about a blue chip. And based on a year’s trending, the share price have somewhat stabilized at that range.
      13 Feb 2019
  • Lee Jin Fei Andre
    Lee Jin Fei Andre
    Level 3. Wonderkid
    Answered on 14 Feb 2019

    What I could say is the other posters are right in their responses. Personally, I would follow, because higher buy volume is also a sign that people see additional value in the company's future hence they are buying now. It only makes sense, provided the company is stable and without any red flags, but you'll never know...

    More importantly, even if you followed, would you ever know when these millionaires are going to pull out their investment? If you can't tell, and don't pull out yours in time as well, I would say you're in the run to lose big. (Assuming the trades are legal and not any ploy for manipulation etc).

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  • LB Sheng
    LB Sheng
    Level 2. Rookie
    Answered on 19 Feb 2019

    Short answer is yes. For speculation purpose. Since usually $5M could rather push the share price upwards for short term and you may ride the wave.

    In long run, it is not easy to predict as any business has potential to go bad.

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  • Lim Chun Long Jimmy
    Lim Chun Long Jimmy, Biz Partner at Flagship Games
    Level 5. Genius
    Answered on 14 Feb 2019

    You may open a CGS-CIMB Securities trading account and access the iBillionaire feature, and see what happens to the share price.

    With iBillionaire, you can:

    • Discover the stocks owned by Billionaires
    • Review daily and yearly performance of Billionaires
    • Know the Daily Losers and Gainers
    • Learn how much of the company a billionaire owns, how many shares and at what price they made the transaction
    Comments (2)
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    • LB Sheng
      is it an ad?
      19 Feb 2019
    • Lim Chun Long Jimmy
      No, it is not an ad. It is a feature for all CGS-CIMB Securities trading account holders.
      20 Feb 2019
  • Jonathan Chia Guangrong
    Jonathan Chia Guangrong, Fund Manager at JCG Fund
    Level 6. Master
    Answered on 13 Feb 2019

    Do you share the same line of thought that is compiling this group to purchase the shares? Even so, you need to do your own due diligence first. The big and regular purchases may cause a big jump in share price, which may trigger an investigation by sgx.

    Comments (2)
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    • Question Poster
      Thank you for your reply, putting law aside. If this fund is a blue chip fund will there be anything you would add?
      13 Feb 2019
    • Jonathan Chia Guangrong
      I'll assume you are referring to a unit trust. If this is the case frankly I won't be able to advise much. Not sure if significant buying/selling into the fund will impact the nav much as I do not have the interest to evaluate funds other than to scrape part of the surface as part of my day job.
      14 Feb 2019