Alibaba 5x short DLCs suspended briefly on SGX as shares jump over 15%
Yong Hui Ting
TRADING for the Alibaba five times short daily leveraged certificates (DLCs) listed on the Singapore Exchange (SGX) has been momentarily suspended as the airbag mechanism was triggered. An airbag mechanism is triggered when the underlying asset of the DLC moves against the DLC by a set amount, such as 15 per cent for five times leveraged DLCs. The movement in share price triggers the mechanism and trading is halted for between 30 and 45 minutes.
This comes as Alibaba shares gained 14.3 per cent to US$98.40 on the New York Stock Exchange before the market closed on Tuesday (Mar 28).
Its listing on the Hong Kong exchange was up 15.3 per cent or HK$12.90 to HK$97, with more than 12 million shares trading at the opening bell. The counter closed up 12.2 per cent at HK$94.55 on Wednesday.
On Tuesday, Alibaba said that it would split its company into six business groups, each with the ability to raise outside funding and go public.
The announcement coincided with the return of its billionaire co-founder Jack Ma to China after more than a year abroad.
Analysts from DBS Credit Research believe the move would be “credit positive” for the group. Post-breakup, each unit would be independently responsible for its own funding, rather than being funded from the holding company.
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“From the equity perspective, the other non-core units are almost valued at nil, so there could be more value to be unlocked, based on sum of the parts,” said DBS’ analysts.
OCBC Investment Research on Tuesday revised its estimates on Alibaba’s net asset value to HK$133 per share, based on sum-of-the-parts methodology.
“This suggests that Alibaba Group’s management does see that the current share price is undervalued, and is undertaking these corporate actions to realise underlying value,” said OCBC analysts.
“While the timing and details of this restructuring has yet to be announced, we see this move as a positive catalyst for Alibaba Group’s share price, and reiterate our fair-value estimates of HK$137.”
Trading on the DLCs have since resumed, based on the new observed price at HK$98.
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