MR PATRICK Lim, the associate director of financial advisory firm PromiseLand Independent, recalls vividly the anguish he felt when he lost nearly $380,000 on the stock market in less than seven hours in 1998.
This was when Malaysia unexpectedly introduced capital controls on Sept 1, 1998 and declared the trading of Malaysian shares on Singapore's Clob International to be illegal.
This caused the value of Malaysian shares traded on Clob to dive steeply.
Before that fateful day, Mr Lim had borrowed cash to fund his stock purchases and had several equity margin accounts with banks and finance companies.
Almost all of the securities pledged were Clob shares traded in Singapore. All were speculative counters or penny stocks.
After Malaysia imposed the capital controls, banks and finance companies would no longer allow investors to borrow money using Clob shares as collateral.
Investors like Mr Lim had to either put up fresh collateral that would be acceptable to financial institutions or repay the loans.
And he had only one day to do it, failing which his shares would be forcibly sold on the open market.
"Because of the six-figure loan I had taken, there was no way I could raise the capital, so my whole Clob portfolio was sold off," said Mr Lim.
At the time, Mr Lim had Clob shares such as Idris, Promet and Berjaya, which were the hardest-hit and were sold down aggressively, no thanks to margin calls by banks and finance companies.
"Having lost about $380,000 during the Clob fiasco and paid humongous 'tuition fees', I have learnt that, in any form of investment, one should never indulge in speculation," said Mr Lim.
He cautioned investors not to borrow or leverage to invest.
"Invest only the money that you can afford to lose," he added.
