Investors look forward to circuit breakers in Singapore

The circuit breaker mechanism, which the Singapore Exchange (SGX) has been considering, has become a topic of hot discussion amid drastically volatile trading of three stocks. The Securities Investors Association of Singapore (SIAS) has called on the SGX to introduce circuit breakers immediately. Local media on Friday quoted the exchange as saying that it is investigating into the volatile trading in the three counters. The exchange said that it will have to get regulatory approval before the dynamic circuit breaker can be introduced, adding that it is expected to be implemented early next year. The mechanism has a five-minute cooling-off period that will be triggered once the prices of a counter move by more than 10 percent in five minutes. During the cooling-off period, trading can continue, but it must be at or within the 10 percent price band. SIAS also proposed a longer cooling-off period for investors to evaluate the situation. "Personally, I think five minutes (cooling-off period) is too short," said David Gerald, president and chief executive officer of SIAS. "Retail takes time to digest; they take time to receive the information. So perhaps, it should be longer, but it's one of the safeguards that we've been looking forward to." The stock prices of Blumont Group, Asiasons Capital and LionGold Corp. fell 56 percent, 61 percent and 42 percent respectively within the first hour of trading last Friday, prompting the Singapore Exchange to halt their trading. The trading of the stocks resumed on Monday after the SGX announced that the stocks were "designated securities," which means that short selling is banned and that buyers of the shares in the three companies must pay cash upfront instead of getting the usual three-day grace period to make payment. Despite that, the share prices of the three counters further shed 85 percent, 86 percent and 71 percent following resumption of trading in their shares on Monday. Blumont, which once traded at 2.45 Singapore dollars (1.96 U.S. dollars) in late September, closed at 0.2 Singapore dollars on Monday. Local media reported that the price of Blumont had been rising over the past year. It rose from 0.3 Singapore dollar in January this year to 2.45 Singapore dollars in September. The SGX made enquiries to the company on the reasons of the unusual rise. The company said it had no clues. Kelvin Koh, head of market surveillance at the SGX, also said that there was short selling of the shares in Blumont Group and Asiasons Capital on Monday, despite curbs on such trading for the designated securities. "We will be investigating these cases and take the appropriate disciplinary actions as necessary," local media quoted Koh as saying. There were purchases of 53,000 Asiasons shares and 73,000 Blumont units on the buying-in market on Thursday. Koh said the SGX will continue to monitor closely the market in the three designated securities. "We will assess the trading conditions and lift the designation as soon as it is appropriate to do so," he said. (1 U.S. dollar equals 1.25 Singapore dollars)