Tuesday June 25, 2013

‘Extraordinary’ share price gains and losses erased


PETALING JAYA: The share prices of the eight counters that saw “unusual” movements 10 minutes before the closing bell on Friday have corrected, erasing most of the “extraordinary” gains or losses.

An observer told StarBiz that share prices would normally recover when the trade was genuine, and that it was a “non-event”.

“Some buy on price weakness while there is also a possibility that (the said) companies supported the share price,” she said. “As some of the counters are illiquid, the prices are easily moved.”

There has been market talk that the trades were ordered by a foreign fund and the intermediary was Kenanga Investment Bank Bhd.

A person familiar with the matter confirmed that Kenanga Investment Bank was indeed the brokerage that had executed the order, but clarified that there was nothing “unusual” about the trades.

“It is well-known that it was the day of foreign funds rebalancing (on Friday),” he said, adding that it was normal for fund managers to review their portfolios on a quarterly basis.

He also explained that the transactions were done in such a way because the order was a “market-on-close” order, which required the dealer to execute the trades as close or equal to the closing price of the day.

He pointed out that the sharp changes seen were attributable to the illiquid condition of the local bourse.

The observer said it was difficult to uncover the reasons behind the transactions but noted that it did not breach trading regulations.

“We don't know what the mandate (of the orders) was. Thus, we cannot speculate,” she said.

She also ruled out the possibility that the trades were fictitious, as regulators would be able to track such practices as the trading process was highly regulated.

Bursa Malaysia had also clarified that the trades were “valid and genuine”.

HwangDBS Vickers Research said in a report: “We sense that the share price drops were likely due to specific shareholders looking to exit the stocks for broader market risk aversion or portfolio reasons,” it noted.

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