US-based bank triggered sell-down
The sell-down of three stocks two weeks ago on the Singapore Exchange (SGX) was mainly triggered by a leading US-based investment bank followed by a Singapore broker, said industry executives.
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The Edge Financial Daily
Written by theedgemalaysia.com
Wednesday, 16 October 2013
KUALA LUMPUR: The sell-down of three stocks two weeks ago on the Singapore Exchange (SGX) was mainly triggered by a leading US-based investment bank followed by a Singapore broker, said industry executives.
An industry executive said the investment bank was particularly a major seller of LionGold Corp Ltd and Blumont Group Ltd.
The short selling of the stocks was followed by a leading Singapore broker.
“The selling by the two started the fall of the two stocks. Eventually Asiasons [Capital Ltd] also felt the effect because it was the single largest shareholder of LionGold,” said a broker.
But to be fair, the US-based investment bank, being a LionGold shareholder, disposed of its equity interest in the company, followed by short selling the stock, because it felt the valuations of the stock were high.
It is learnt that the US-based investment bank took up a position in LionGold
during a roadshow late last year.
“Since shorting of shares is allowed in Singapore, the US-based investment bank probably decided to sell because of the steep rise in the price of Blumont and LionGold.
“The short selling by the Singapore broker exacerbated the situation and caused the collapse of the share price,” said a broker.
It was speculated Malaysian brokers were hit by the sell-down to the extent that executives of a top brokerage had to go to Singapore to check on the books.
However, an investment banker familiar with the operations of Malaysian brokerages with presence in Singapore, said the broking firms were not affected.
“For instance, brokerages such as Maybank and RHB stopped extending credit to clients wanting exposure to the stocks affected a few months ago. It was way before the sell-down occurred,” said the investment banker.
Malaysian banks were not the only ones imposing trading curbs on some Singapore small-cap stocks.
On Oct 3 — a day before the sell-down — UOB-Kay Hian, which has a large retail presence in Singapore, imposed Internet trading curbs on a string of small-cap stocks, including Asiasons, Blumont and LionGold.
Among Malaysian brokerages, CIMB Group Holdings Bhd, Malayan Banking Bhd and RHB banking group have large presence in Singapore through mergers and acquisitions in recent years.
CIMB has a large presence in Singapore since 2005 through the acquisition of GK Goh Securities while Maybank’s presence is underlined by its purchase of Kim Eng Securities in January 2011.
RHB banking group extended its presence in the republic when it acquired OSK Investment Bank Bhd that owns DMG & Partners Securities. AmBank Group also has a presence in Singapore via its associate stake in Frasers Security Pte Ltd.
There was speculation Malaysian brokerages were affected because the three companies that saw a massive sell-down on Oct 4 — Asiasons, LionGold and Blumont — were substantially controlled by Malaysians or companies linked to Malaysians.
On that day, Asiasons fell 63% to close at S$1.04 (RM2.66) while LionGold and Blumont shed 56% and 42% respectively to close at 87.5 Singapore cents and 88 Singapore cents before the three counters were suspended by the SGX. It lifted the suspension but designated the three stocks before trading was resumed on Oct 7.