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Not hard to grasp SGX’s concern over firms’ sharp share price falls
By Goh Eng Yeow
05 October 2013
Many frazzled investors were wondering just what was going on in yesterday’s mayhem over some of the most hotly pursued counters in the local stock market.
One hour into trading, the Singapore Exchange took the extreme step of suspending three counters from trading: Blumont Group, Asiasons Capital and LionGold.
The SGX took this step after all three suffered share price plunges.
Dealers said one had to hark back 13 years when Links Island was suspended over trading irregularities to recall a similar scenario.
It is not difficult to grasp the SGX’s concern. It had issued “please explains” to all three firms on the sharp slide in their share prices right after the starting bell.
And it explained: “This is to safeguard the interests of the market as there could be circumstances that would result in the market not being fully informed.”
Loss-making Blumont - which attracted an unusually detailed SGX query earlier this week to explain a huge jump in its market value to $6.3 billion from $508 million in just nine months - lost almost $3 billion in market value in just one hour of trading, after crashing 56.44 per cent in price.
Gold miner LionGold plunged 42.5 per cent, wiping out about $600 million in market value.
Both companies apparently share a common non-executive director, Ms Ng Su Ling.
Asiasons Capital, which owns 8.72 per cent of LionGold, plummeted 61.48 per cent, causing the firm to lose $1.63 billion in value.
Two other counters - Innopac Holdings and ISR Capital - also attracted SGX queries on price plunges but kept trading.
At the close of trade, ISR Capital, of which Asiasons owns 27.31 per cent, dived 30 per cent, losing $21.4 million in market value.
Innopac, sharing a common substantial shareholder with Blumont, in Clear Water Development, lost $231 million in market value after diving 52.9 per cent.
Is there more than meets the eye over their stomach-churning plunges? The total losses of $5.4 billion in market value are equivalent to the value of Keppel Land.
In its SGX reply, Asiasons’ joint managing director Jared Lim Chih Li claimed “there were malicious market rumours that a team from the Monetary Authority of Singapore has been sent to the company’s office to carry out investigations”.
This followed a Straits Times report on Wednesday mentioning that Asiasons was among 18 counters UOB Kay Hian had put on its restricted list, requiring clients to put up cash payments if purchases exceeded $30,000.
“The company confirms that such market rumours are false.”
Meanwhile, LionGold chief executive Nicholas Ng Yick Hing also alluded to the restriction imposed by brokerage UOB Kay Hian on trading of his firm’s shares.
“The company understands that a local broking house has recently designated the company’s securities. The company believes that this may be a contributing factor to the share price volatility,” he said.
But there is also the SGX red flag when it asked Blumont to explain its spectacular price gain as SGX felt this could not be explained by a spate of acquisitions in recent months, the largest of which was just $46 million.
Blumont yesterday scrapped a $146 million deal to buy into an Australian-listed coal mining company, which it had announced just an hour earlier before the opening bell.
Mr Esmond Choo, UOB Kay Hian’s senior executive director, explained his brokerage’s policy in implementing trading curbs: “It is part of our usual practice to put a trading limit on a stock which has run up beyond what we believe is its fair valuation. What we are doing is to highlight the risk to the client to trade within his affordability.”
For the investors holding the three suspended counters, the biggest question is when the SGX will allow trading to be resumed on them again.
For them, it is going to be a nail-biting weekend.