Rebuttle To Comments By SC & Bursa
Designation, Disclosure, Speculation & Transparency
This has been an eventful week for stocks, and if you are involved in Malaysia and Singapore stocks, the week was even more evntful on the issue of stock designation and disclosures. Huge articles were written in The Edge and The Star Biz on the related issues. Interviews were conducted with the head of SC and Bursa, and here are my rebuttals and comments:
Yusli (Bursa head honcho): In deciding to designate, retail sentiment is a concern but not necessarily a primary one. What is of paramount importance is the maintenance of a fair and orderly market ..
My comments: Good answer, retail sentiments should not be a primary factor is designation.
Yusli: In the case of IRIS, an UMA and Market Alert were issued previously to warn investors not to be driven by excessive speculation in their investment decisions relating to IRIS.
My comments: The warnings were not serious enough. Investors do not take these warnings to heart because just this year alone there were 20 "Unusual Market Activity" / Market Alerts issued this year so far, how many were designated?? Because of the low hit ratio, investors generally brush them aside. If the hit ratio is closer to 50%, you bet investors would take these warnings seriously. Then investors would try to avoid getting involved in these counters once warnings are issued.
Yusli: It is not possible to have an automatic mechanism for designation because there are several factors that have to be considered that are fluid, not static. Designation is based on a set of criteria & parameters. We are not at liberty to disclose these parameters as doing so would jeopardises the effectiveness of our surveillance function.
SC : Actions such as designation of securities are taken in specific circumstances after consideration of all aspects of trading of a security and a thorough assessment of all relevant factors. Such a considered approach allows a holistic review of a particular situation, permitting a nuanced and un-mechanistic response.
Comments: As per my previous blog, the designation can have automatic goalposts. Right now, we have no knowledge of the crtieria. If SC & Bursa are concerned on syndicates "escaping and navigating" via these goalposts, there could be additional liberty to designate above and beyond these stated rules, but there must be clear rules / mechanism that all investors should know beforehand. Right now, investors are playing in the dark. Its like betting on an Arsenal / MU match and MU is giving half a goal, but with 20 minutes remaining, the goalposts of Arsenal is shrunk by half in width - it is not fair. Buyers of these counters buy on the understanding of available facts, not on sudden changes in rules that are currently impossible to divine or estimate. A balance has to be struck on effectiveness of governance and transparency.
Zarinah (SC): If they know there are dishonest people (in the SC), please let me know. Don't just talk about it.
My comments: As the governing body, the onus should not be on the public but rather that the structure of the organisation must be transparent enough to gain respect and integrity among investors. Hence if there is "room" for hanky panky to happen, it must be dealt with internally. By have automatic suspension / designation rules being made public, it solves a lot of problems and reduces the "vicious rumours". As a public body with a strong governing threshold, the independence and transparency of the body is of utmost importance. Why give room for the public to suspect or talk!?