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SGX unlocks volatile trio, but adds shackles

No short-selling or contra for Asiasons, Blumont and LionGold

[SINGAPORE] Singapore Exchange (SGX) will allow the three volatile counters it had suspended to trade today - but with curbs.

The shares of Asiasons Capital, Blumont Group and LionGold Corp will resume trading with restrictions against short-selling and taking on new contra positions, according to a regulatory announcement issued by the exchange yesterday.

The move is expected to offer an escape route, albeit a potentially costly one, for traders who had open positions on the affected stocks after Friday's surprise intervention by SGX in suspending the counters, and possibly pave the way towards normalised trading.

"It's a good move," one trader said. "Hopefully it will calm the market a little bit after last Friday, because it triggered a tsunami, you know. Carnage, man, pure carnage."

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SGX, which suspended those stocks on Friday morning as their prices plunged, said it will continue to "monitor the trading of those stocks and review circumstances in due course" to end the restrictions.

Citing trading rules, SGX said it may declare a stock as a "designated security" if, in its opinion, there has been manipulation of the security, excessive speculation in the security, or it is otherwise desirable in the interests of markets established or operated by SGX-ST".

While they are designated, sellers must own the shares they wish to sell, which means that the practice of short-selling will be prohibited. Buyers must also pay cash upfront, effectively banning contra trading, in which a trader buys a stock hoping to sell it at a profit within the three-day settlement window.

Traders who have existing contra trades, however, will be allowed to sell to clear their positions.

Internet trading will also be banned for the designated securities.

The trader said lifting the suspension would bring much-needed relief for traders who had unsettled contra positions, because broking houses will typically demand that they pay up once a stock is suspended. Still, because the share prices of the three counters could potentially be far below the price at which they were initially bought, traders who try to flip the stocks now may find themselves sitting on a sizeable loss.

"There's a lot of blood on the streets," said the trader, who added that banning short-selling in the shares was a good move. "I bet you all the short-sellers are sitting and sharpening their knives already if you resume trading . . . So if you stop short-selling, this is like a circuit-breaker they've put in."

The market is likely to remain cautious about the affected stocks and many penny counters, however.

Shares of Asiasons, Blumont and LionGold all fell sharply when the market opened on Friday, as did the stocks of Innopac, ISDN Holdings and ISR Capital. SGX made a rare decision to query all six stocks publicly and, before they could reply, it suspended three of them.

SGX and MAS have not commented on whether there is any investigation into the counters.

The affected stocks were linked partly by remarkably sharp price appreciations over the past few weeks and months that drew a number of public queries by SGX. A number of them also had a shared history of similar shareholders and directors.

LionGold said after the suspension that it was negotiating a possible acquisition. Blumont, which had announced a deal before Friday's opening, eventually reported that the deal had been called off because of adverse trading conditions. Asiasons, meanwhile, said the fact that broking house UOB Kay Hian had placed restrictions on the trading of its stock might have triggered the Friday selloff.

Asiasons, which closed at $2.70 on Thursday, last traded at $1.04 before the suspension.

Blumont ended the same day at $2.02, but last changed hands at 88 cents before being suspended.

LionGold closed on Thursday at $1.51, but headed into suspension at 87.5 cents.

The last time SGX used the "designated" declaration on a stock was in April 2008 when short-selling was banned on the shares of Jade Technologies Holdings following the collapse of a takeover bid. Jade's shares rose sharply after the designated status was removed a few days later.