|25 January, 2019

Singapore's $40bln flash crash clouds IPO push

Jardine Matheson shares fell 83% before rebounding, briefly wiping $41bln off the company’s market value

An SGX sign is pictured at Singapore Stock Exchange July 19, 2017.

An SGX sign is pictured at Singapore Stock Exchange July 19, 2017.

REUTERS/Edgar Su

HONG KONG (Reuters Breakingviews) - Singapore could ill afford a flash crash. Shares of Jardine Matheson abruptly plummeted some 80 percent on Thursday before quickly rebounding. It’s a setback for a market already plagued by outages and liquidity concerns. Attracting new issuers just got harder.

A mysterious raft of irregular pre-market trades erased $40 billion from the Anglo-Asian conglomerate’s valuation. The Singapore Exchange said sell orders overwhelmed buys, and were executed at $10.99 a share when the market opened versus the last closing price of $66.47. A fat finger has been ruled out as have malfunctioning systems, according to exchange officials.

Mistakes happen, including expensive ones at major banks, too often for comfort. That’s not enough of an excuse, however, to prevent angry regulators from tracking down whoever placed the Jardine Matheson order in the first place, and the brokerage that accepted and executed it. Such stock handlers, especially in a financial hub like Singapore, are expected to have internal checks and controls to prevent irregular trades from getting the green light.

The episode may be a setback for the Lion City’s latest attempts to woo companies onto the bourse. Singapore's main board didn’t crack the top 40 worldwide exchanges in terms of IPO volume last year, according to data provider Dealogic. It hosted just three debuts that raised $400 million. Hong Kong, Jardine Matheson’s former venue, reached the top spot last year, ushering in 124 IPOs that raked in $33 billion.

Singapore has been making fresh efforts to win over the likes of homegrown ride-hailing upstart Grab. It even went so far as to support weaker corporate governance last year, following Hong Kong in allowing some founders to use dual-class shares to keep outsized control of their companies with smaller economic stakes.

Frustrating trading shutdowns already have bedeviled Singapore and hurt investor confidence. Power outages and technological failures got so bad that in 2017 regulators gave SGX two years in which to improve its systems. There are also nagging worries about how quickly equities can be sold in Singapore, where trading volume is low, without jarring the prices. Progress that might have been made on these issues just disappeared in a flash.

CONTEXT NEWS

- Jardine Matheson shares fell 83 percent in Singapore on Jan. 24 before rebounding, briefly wiping $41 billion off the company’s market value.

- About 167,500 shares in Jardine Matheson traded at $10.99 each versus a Jan. 23 closing price of $66.47, Reuters reported on Jan. 24, citing traders. The stock later bounced back to trade at $66.80.

- Singapore Exchange said in a statement that it found no basis to cancel the trades, which occurred during the pre-opening phase of trading, when sell-orders greatly exceeded buy-orders.

- “Trading was orderly and there was no sign of manipulation,” the statement said. “We have also ascertained that the orders were not due to fat finger errors or any malfunctioning systems on the part of the participants.”

(Editing by Jeffrey Goldfarb and Sharon Lam)

© Reuters News 2019

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