Singapore’s Sky One share price collapse of over 90% in one day; “A lot of people lost a lot of money on these. What’s on the street right now is, ‘Oh gosh, what’s next?’ This needs to stop . . . Why don’t we just set everything back to zero, start all over again? Press the reset button.”

PUBLISHED OCTOBER 30, 2013

Brokers raise shields with Sky One falling

BY ANGELA TAN ANGELAT@SPH.COM.SG AND KENNETH LIM KENLIM@SPH.COM.SG

SGX has so far only queried Sky One, but not intervened in the trading of its shares – PHOTO: SPH

‘SGX might as well switch off its system at this rate. Its poor communication has killed what’s left of the penny stock market,’ a broker complained.

[SINGAPORE] Sky One Holdings’ collapse on Monday prompted a number of brokers to update their lists of restricted stocks this week, raising questions about why the Singapore Exchange (SGX) did not impose trading curbs as it had done with three other stocks a few weeks earlier. Trading in shares of Sky One, a logistics provider being targeted in a reverse takeover (RTO) by a coal- mining business, whose stock fell as much as 91 per cent early Monday before being halted, is currently restricted at several brokers, including AmFraser, CIMB, DMG, OCBC Securities and UOB Kay Hian, according to market sources and some of the brokers’ own websites.Sky One shares continued to retreat yesterday, shedding 7.6 per cent, or 0.7 cent, to close at 8.5 cents. The stock had entered the weekend at 47 cents.

“It took two years to climb all the way up to whatever price it was, and all it took was one morning for it to collapse all the way down,” one trader said.

“A lot of people lost a lot of money on these. What’s on the street right now is, ‘Oh gosh, what’s next?’ This needs to stop . . . Why don’t we just set everything back to zero, start all over again? Press the reset button.”

The nature of the trading curbs varies with each broker, but there are usually restrictions against online trading, short-selling or Internet trading. There are often also bans on contra trades of such stocks, where shares can be bought and sold before settlement.

OCBC Securities managing director Raymond Chee said in a statement that, in general, curbs are imposed as a way to manage risk.

“OCBC Securities puts in place trading curbs on selected securities from time to time as part of our credit risk management process,” he said. “Such stocks, which have typically experienced high volatility, cannot be traded online. Any trade that is larger than $25,000 will also require a cash deposit for the amounts in excess.”

Other new entrants to restricted lists yesterday included IT service provider OKH Global, at UOB Kay Hian; and construction company Swee Hong, at AmFraser.

All three companies have been queried by SGX recently because of unusual trading activity in their shares. All of them have replied that they were not aware of any undisclosed information that could affect their share prices.

While the brokers have imposed curbs on Sky One, SGX has not – puzzling some observers.

“SGX might as well switch off its system at this rate,” one broker said. “Its poor communication has killed what’s left of the penny stock market.”

SGX has so far only queried Sky One, but not intervened in the trading of its shares.

This is in contrast to the bourse operator’s actions on Oct 4, when it queried six companies and then suspended three of them amid sharp drops in their shares.

The suspended stocks (Asiasons Capital, Blumont Group and LionGold Corp) had fallen between 40 and 65 per cent on the morning of Oct 4 before they were suspended by SGX – smaller drops than Sky One’s plunge on Monday.

SGX later allowed trading in those three stocks to resume, but only under “designated” rules that bar short-selling and require upfront cash settlement.

SGX said at the time that it had taken those actions to ensure that enough information was available to the market, and to allow orderly trading to resume. SGX and the Monetary Authority of Singapore (MAS) are currently reviewing the trading of those three stocks.

The difference between the treatment of those stocks and Sky One has raised some questions. One fund manager said SGX ought to better communicate the rules, if only because trading suspensions and “designated” labels are so unfamiliar to most of the market.

“It’s something they haven’t done very often,” the fund manager said. “Even if it was judiciously used, it’s so sparingly used, so infrequent . . . the majority of the people don’t understand how it works.”

SGX did not respond to questions about why trading restrictions were not imposed on Sky One.

Kelly Teoh, market strategist at IG Asia, said part of the problem was that valuations are stretched, and many retail investors are more exposed to the more volatile penny stocks.

“You want people to have a more holistic view of investment,” Ms Teoh said. “Unfortunately, people tend to have the notion that equities only go up. It is shocking, and not a right mentality . . . Hopefully, when SGX implements the smaller denomination trades for the bigger stocks, that will give people some diversification.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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