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Brief US$41b dive in JMH yields S$12m paper gain for buyer
IN just one session, an investor - or a bunch of them - was more than S$12 million richer trading Jardine Matheson Holdings shares early yesterday morning.
Shares of the conglomerate plunged 83 per cent on Thursday morning, wiping out US$41 billion in share value - more than equivalent to the total value traded on the Singapore Exchange (SGX) in two months.The exchange has ascertained that the trade was not due to fat finger errors or any malfunctioning systems on the part of the participants.
As such, the exchange will not be cancelling the trades, which were executed based on pre-market quotes and bids.
About 167,500 shares were traded at US$10.99, compared with Wednesday's close of US$66.47.
In response to queries from The Business Times, an SGX spokesperson said sell-orders greatly exceeded buy-orders during the pre-opening phase on Thursday, and the Indicative Equilibrium Price (IEP) dropped to between US$10 and US$11. Sell-orders continued to flow in even as the IEP fell, and the trades were executed at US$10.99 when the market opened.
"The IEP throughout the pre-opening phase was transparent to the market and participants had ample time to react before the market opened," said the spokesperson. "Sellers could have withdrawn their orders if they did not wish to sell at the IEP. Trading was orderly and there was no sign of manipulation."
The sell-orders were mostly market orders, a type used by institutional participants where the size of the order is set but not the price, SGX said.
Jardine Matheson's shares quickly recovered to regular levels after the trades, and closed at US$66.82, up 35 US cents or 0.53 per cent for the day on a total volume of 430,000 shares.
Traders told BT that the plunge happened too early for many traders to take advantage of it, or for it to significantly affect the rest of trading on Thursday. "It was very early in the morning, so by the time people realised what happened, it was already back up," said KGI Securities research analyst Marc Tan.
He added that the plunge had "nothing to do with the company", because prices recovered quickly to levels even higher than Wednesday's.
PhillipCapital remisier Robin Ho noted that Jardine Matheson is usually thinly traded, so any such error would result in a big change in stock price. "Smart traders might have realised it (might be) a fat finger mistake and come in quickly, but the next trade after that was at US$56 already. There was probably only one guy who managed to profit from it," said Mr Ho.
CMC Markets analyst Margaret Yang told Reuters earlier on Thursday that it would be difficult for SGX to cancel the trade even if it wanted to.
"The transaction was divided into 164 trades, suggesting there could be more than a hundred counterparts behind this trade. This makes it an extremely difficult task for the stock exchange to recall or cancel it, and the seller will need to bear the losses," said Ms Yang.