In response to the sound and fury of market investors angry with the treatment of Sky One, the SGX rebutted bluntly: “ …. the SGX’s review revealed no threat to fair, orderly and transparent trading. Hence, no suspension occurred”.
But three weeks ago, billions of dollars were wiped off the the market capitalisation of three stocks – Blumont, Asiasons and LionGold – because the very same regulator deemed that “our review showed disorderliness in the market and lack of transparency that could also threaten the fairness of trading”.
Check out these words: “could also”. Not definitely, not emphatically but “could also”. So we let billions of dollars ride on a hunch?
Richard Teng, the Deputy Chief Regulatory Officer at the SGX, defends further: “In the case of Sky One, designation was not necessary. But for Blumont, Asiasons and LionGold, designation was instituted to remove the froth of excessive speculation in the market and permit the fundamentals to assert themselves in determining market prices.”
To put it curtly, should that not be the market’s job? Having flagged out the gaping flaws between the three companies’ fundamentals and their stock prices, should not the SGX have left the market determine the appropriate equilibrium? Why the interventionist approach?
Many investors would have been glad to live with the wild gyrations of these stocks. To declare a designated status is to allow trading with one hand in cuffs. It would have been wiser for the SGX to suspend the stocks for an extended period for the companies to clarify their situation and for broking houses to revisit the fundamentals and for the issues to be sufficiently aired.
By imposing the designated status, the SGX did not create “a fair, orderly and transparent trading” for the three companies or the market. To the contrary, it exacerbated the uncertainties for the investors, companies, their suppliers, bankers and others. Hence, the share prices of the three companies plunged.
Queries and suspensions are appropriate tools, and in many instances sufficient. . Declaring a designated status should only be utilized in cases where fraud or criminal breaches are suspected or detected. The SGX should be careful not to overplay its hand. The collateral damage could be extensive, as seen in the current inertia in the market.
See also The Singapore Exchange is a shrinking capital market, but still has its strong points - Bloomberg