- Saturday June 13, 2009
Taming the scourge of syndicates
Sideways
By ANITA GABRIEL
Proactive, not reactive measures needed
BACK in 2006, in a display of sheer obstinacy and disregard for caution, when Bursa Malaysia shot out a cautionary note to warn investors of the unusual gyrations in several counters, some of them reacted but not as expected – their share prices rose at a more feverish pace. These counters were clearly being ramped up and manipulated by syndicates at the expense of unwary investors.
Left with little choice and to curb excessive speculation, Bursa, in consultation with the Securities Commission, slapped some of these counters with the much dreaded designated status which meant that trades on these securities could only be done with cash upfront. The move was enough to spook investors who dumped the stocks but for some of them, the fall was not as spectacular as their rise. But there were a great number of retail investors who bought into the hype and ended up with stomach-churning losses.
More recently, renewed confidence that economic recovery may no longer be an elusive goal for the country has injected much vigour into the moribund stock market. But it has brought with it an unsavoury accompaniment; the syndicates (some prefer to use the euphemism “market makers”) are clearly back in the turf, spinning stories and churning stocks and getting many to believe them hook, line and sinker. Investors, as they say, have short memories, made even shorter at the chance of making a quick buck.
For some, the stories being churned may eventually stack up as they seem “highly plausible” but as it stands now, they have yet to surface. One such story (in various permutations) made its way to the market two weeks ago. This time, it didn’t involve the usual suspects but involved the companies controlled by T. Ananda Krishnan (AK) and as such, it piqued much curiosity.
Two weeks ago, a local research firm shot out a news flash that Maxis Communications Bhd, two years after it was privatised, is seeking a relisting on the stock exchange. It speculated that a “major corporate exercise at the highest level” was brewing involving a plan to inject Maxis into Astro All Asia Networks plc. A week later, the rumour took on a different dimension; Maxis may undertake a reverse takeover of another listed entity, Measat Global Bhd. Then this – Measat and Astro may merge. All of these companies share AK as a common shareholder.
Aha... Maxis To Be 'Listed' Again?
Yeah OSK Research was the culprit! As suggested by me, tons of salt was needed before reading it. For example.
- “Although details are sketchy, we gather that a plan is being mooted to inject Maxis into Astro,” it said in a report issued on June 1.
- “While we are not able to confirm the accuracy of the news or the mechanism through which the re-listing would be executed, we believe it is not implausible given the strong paternal links of both companies via a common shareholder.
Gee!
How could a reputable research house write an article issues a report based on sketchy details and more so when they cannot even confirm the accuracy of the report?
Astro today is 3.24.
On the day of my posting Maxis To Be 'Listed' Again?, Astro opening trading price was 2.91.
Err... how eh?
Anyway the Star Biz article then continues...
- It didn’t take long for the counters to react to such news and no amount of querying (by Bursa) or denials (by the companies including Maxis CEO Sandip Das’ blend “it was just rumours” denial) managed to throw cold water over the rise in the typically subdued Measat shares. Measat hit limit up a week ago and when Bursa issued a note advising investors to exercise caution and due diligence on trading of Measat shares, it was – again – snubbed.
The fact is just because a plan is plausible does not make it a done deal. And it would help if investors took cognisance of that fact.
“Who would you believe – the market or Measat’s board of directors?”, asked a blogger who was tracking the Measat play. On Friday, Measat announced that its MEASAT-3a satellite has been scheduled for launch on June 22 although analysts do not think that this development warrants the kind of rise seen in the counter.
Interestingly, Bursa’s caution note did not merely highlight the trading in Measat shares but also that of Transmile. Indeed, the rise and fall of Transmile from a high flying stock with great promise to one marred by accounting discrepancies happened not too long ago, which makes it even harder to explain the recent consistent rise in its share price.
Transmile, like almost all others who have been queried by Bursa on the unusual market activity, which some say is Bursa’s “first line of attack,” also replied that it did not know of any corporate development to account for the jump in its share price.
Let’s face it. No amount of market query, alerts or caution notes are going to dampen the appetite of syndicates. These risk management systems may be a good first step but on their own, they are inadequate and moreover, merely reactive. A more proactive mode is needed to stem the tide of unscrupulous share-controlling syndicates who manipulate share prices and create a false market.
Yes, for a market to remain robust and vibrant, market makers are needed but definitely not the kind who pump and dump after having “cornered” a counter and who prey on naive investors, leaving them behind as unsuspecting casualties.
For at the end of the day, who wants to invest in a false market driven by conjectures?
Hmmm...
- Let’s face it. No amount of market query, alerts or caution notes are going to dampen the appetite of syndicates.
Syndicates rules?????
On Thursday I posted Measat Challenging Bursa's Query Exercise By Soaring Yet Again!
On Business Times: Queries not meant to be reprimands: Zarinah
- QUERIES from Bursa Malaysia are not meant to be reprimands but rather a chance for listed companies to give investors more information, the Securities Commission (SC) said yesterday.
Companies must also be quick to deny any speculation or rumours.
"The Listing Requirements require PLCs (public-listed companies) to make accurate disclosure," SC chairman Tan Sri Zarinah Anwar said during a briefing with editors.
Yesterday, Bursa Malaysia warned investors to be careful when trading in shares of satellite operator Measat Global Bhd and Transmile, an air cargo company.
Measat jumped to a 22-month high on speculation its owners will combine the business with a phone company or buy out the unit.
So a Bursa Query is for a chance for listed companies to give investors more information?
Oh!
Looks like Bursa Query would be a waste of time because if you look at Measat stock trading NOW, the stock is acting such a query does not exist!
On Thrusday evening, Two More Queries From Bursa Malaysia
Did it stop the heavy volume on Compugates? Nope. In fact as stated in the posting Compugates: Bursa Queries And MD Selling Massive Stake, Compugates was actually up most of the day by some 6.7%!!! ( Do see also Explanation On Compugates Heavy Selling By MD )
Which is why I think Anita Gabriel has a point here.
Bursa can query and query and query and yet the stock can rocket to the moon!
How?
Does Bursa Query works?
YO dude,
ReplyDelete1)This is bolehland whereby rumors sometimes had more truth than actual news itself.
2)Even though Bursa query doesnt work as intended, but remember someone sais that certain degree of speculation is actually good for market (who do u think pay for bursa staff).
3)having said that, i believe the ball is actually lied with investors himself to differentiate the "good" rumor and bad "rumor". There are many methods to invest/speculate in share and "rumor" is way too hard for me :)
4)If investors are not greedy/gullible, no amount of tricks employed by syndicate will be effective.
5)Lastly, BURSA has the ultimate weapon against syndicate through designated share status. But, the WMD was used always too late as i thought it was used to prevent investor/better to salvage whatever money they still have in that share.
Just my 2 sen