- POSTED: 06 Sep 2013 22:42
This graph is an experimental feature that tracks number of views over time.
Calls for financial market regulators to tighten up short selling rules have not fallen on deaf ears.
SINGAPORE: Calls for financial market regulators to tighten short-selling rules have not fallen on deaf ears.
The Singapore Exchange (SGX) said it will consider carefully the proposal by the Securities Investors Association of Singapore (SIAS).
Responding to a query from Channel NewsAsia, SGX said its objective is to operate a fair, orderly and transparent market.
SIAS made the call after Singapore-listed China Minzhong was attacked by a US short-seller Glaucus last week.
The recent short-selling attack on China Minzhong wiped out S$318 million or half of the firm's market value in a day.
And although its share price has since recovered, the episode has the investing community calling on regulators to take action against unscrupulous short-sellers.
“One important objective of the exchange is to ensure a fair playing field which means having information available to all before the action starts," said Mr Jimmy Ho, president of The Society of Remisiers (Singapore).
The society said the issue is not on whether Glaucus' allegations were true or false, but the concern over the firm's built up of short positions against China Minzhong, followed by the release of negative information on the firm, and then cashing in from the subsequent sell-off.
This was done at the expense of retail investors.
Experts said it will be tough for market regulators to enforce rules on foreign short-sellers.
Associate Professor Mak Yuen Teen from NUS Business School said: "The regulations are already there.
"In the Securities and Futures Act, there are regulations relating to market manipulation, false or misleading statements, and also fraudulently inducing people to trade in securities. The question is how can regulators here enforce regulations on an extra-territorial basis."
Responding to a query from Channel NewsAsia, the Monetary Authority of Singapore said it "will take appropriate action against breaches of (Singapore) laws and regulations".
Instead, it said the investment research community can do more to help retail investors make sense of the situation.
Assoc Prof Mak said: "When the short-seller issues a negative report, the market price halves. And you see some of these analysts, immediately they stop believing in their recommendations. Some of them say they no longer cover the company, or they change their view completely.
"Actually that reflects very badly on them - what kind of analysis have you been doing all along? The analyst community needs to reflect on the quality of its own work."
Listed companies should also accept that they are constantly under close scrutiny and should raise efforts in investor outreach.
"This is not the first case where short-sellers have gone and look at filings in other countries and found that it doesn't add up... In terms of prevention, companies need to understand that people are going to continue to do that. You've got to make sure that your regulatory filings in China are accurate, or you need to be explaining if there are going to be differences," said Assoc Prof Mak.
Indonesia's Indofood Sukses Makmur has provided a boost to China Minzhong's shares by launching a takeover bid for the company.
And late last year, Singapore-listed commodity firm Olam International found support from Temasek Holdings when it was attacked by short-seller Muddy Waters.
At the time, Temasek increased its stake in Olam to 19 per cent, from 16 per cent.