|Blumont, Asiasons and LionGold - SIAS Calls for Implementation for Circuit Breaker Mechanism|
|Date: 08 October 2013|
SIAS has been regularly queried by investors and media as to what SGX should do to avoid wild fluctuations in share price like in the case of Blumont, Asiasons and LionGold.
It is important for shareholders of companies and media to understand that whenever there is a huge fluctuation in the share price, whether upwards or downwards, SGX will have to intervene to maintain an orderly market and, therefore, in the interest of investors. At the moment, it does it by suspending the shares whilst also querying the company for an explanation for the spike or sudden fall as Singapore does not have the circuit breaker mechanism for securities trading unlike Malaysia.
By making these counters as designated securities, SGX is providing the opportunity to the market players to exit the market and at the same time, putting restrictions against short selling and contra trading and by requiring all transactions must be settled by cash. This is to eliminate excessive speculation. These initiatives are to maintain an orderly market.
Blumont, in this instant, had a gradual rise over 9 months. SGX has queried the company concerned whenever its price spiked. It is not correct for SGX to interfere with market forces at a whim but only do so when the price goes up very high triggering regulatory concern.
The Singapore market is relatively stable and not volatile enough. This situation at hand is an exception rather than the norm.
SIAS calls on listed companies to make timely and substantial disclosures to enable the market to make informed decisions. Investors should not panic but take a step back and review the reasons for the sudden fluctuation in the price as an informed investor. The fluctuations in share price is usually due to market perceptions and poor company disclosures providing little information in the market place leading to price speculations and only in some cases due to cornering or market manipulation.
As to whether SGX can help further to improve company disclosures and corporate governance, it is not SGX but companies themselves must be prepared to make full and substantial disclosures in a timely manner to help investors make informed decisions. Better flow of information would help analysts to write better reports to help investors and companies in these situations.
SIAS calls on SGX to implement the circuit breaker mechanism immediately to help prevent wild fluctuations of stock prices to enable investors to digest the information available in the market place during the break and make informed decisions.