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Tuesday 16 March 2010
The curious case of Jardine & the STI
Throughout all of last week, sharp rises in Jardine Matheson (JM), Jardine Strategic (JS) and Jardine Cycle & Carriage (JC&C) to new all-time highs helped push the Straits Times Index significantly higher on five successive days.
Throughout all of last week, sharp rises in Jardine Matheson (JM), Jardine Strategic (JS) and Jardine Cycle & Carriage (JC&C) to new all-time highs helped push the Straits Times Index significantly higher on five successive days.
This elevated the STI to the position of standout performer in the region, outclassing even regional leader Hong Kong. More interesting, on the days when Hong Kong’s Hang Seng was weak, the STI kept powering higher.
Now, the Jardine stocks in question have small free floats - or are ‘tightly held’ if you prefer - and so their gains came with low volume traded. Moreover, in the case of JC&C, there has consistently been an odd trading pattern - more of this later - which has led observers to raise the possibility that something not quite right went on.
Any sense of bewilderment, however, was tinged by an equal amount of quiet resignation, mainly because sudden, strange movements in the Jardine stable have been a common sight in the past and the market has grown used to them.
One dealer said ‘here we go again’ when watching how JC&C rose 78 cents or 3.1 per cent to $26.30 last Monday, exhibiting a pattern that was manifested again on Friday when the stock rose to within touching distance of its all-time high, adding 28 cents to $27.62 with 238,000 shares traded.
The pattern in question was that a large number of trades were of only one lot each as the counter ticked inexorably higher each day throughout the week, a near-relentless climb that led many observers to question whether price-fixing of sorts was occurring. It has to be pointed out, however, that this pattern is a very familiar one, having been a feature of the counter’s daily trading for years.
Highs and lows
Similarly, JM’s and JS’s rises to their all-time highs have come with low volume - JM last week shot up US$4.30 or 15 per cent to US$33.40 on average daily volume of just 494,000 shares, while JS’s gain of US$2.50 or 15 per cent to US$19.58 came with an average daily turnover of 312,600 units.
The first and most obvious question is, of course, why stocks as illiquid as these - or with such small free floats - should still be permitted to retain membership in the STI since active trading is a central index requirement.
Apparently, there are no easy answers to this because of certain technicalities; so for now, it has to remain an issue for the index’s guardians to ponder, especially when there appear to be more suitable and actively traded candidates in the STI’s reserve list that was released last week.
Second, there was accompanying positive research that was issued after Jardine announced better-than-expected results a little more than a week ago - Citi Investment Research, for example, issued upgrades on JS, JM and others within the stable. These were partly based on the figures released but also because of a share buyback scheme that has led to speculation of a possible JS privatisation which Citi said could address the ‘huge discount’ at which JS trades.
Were ‘buy’ reports on some Jardine stocks sufficient to account for the vast outperformance enjoyed last week? To answer a question like this, one would have to study past responses to analyst reports and/or good earnings figures and like the issue of index membership, it is not one that can be easily answered.
It is really a question for SGX’s market surveillance teams to ponder and in this connection, it’s worth noting that the exchange’s regulatory division has at its disposal some pretty sophisticated software that can detect many suspicious patterns in trading, so if there was something untoward behind the rises, chances are good that alarm bells would have rung inside SGX.
However, being a frontline regulator with no real legislation-backed enforcement teeth places the exchange in the awkward position of being unable to disclose any of its investigations unless those above it in the regulatory pecking order, mainly the Monetary Authority of Singapore, have given the green light.
So it’s safe to say that at the very least, the exchange is fully aware of the market’s concerns when it comes to sudden, odd share price movements, not just Jardine, and actually spends a fair bit of time scrutinising such rises or falls.
In Jardine’s case, it surely has looked at the deals last week and, depending on its findings, may or may not have decided to probe further. On the one hand, there was accompanying research and solid results to account for some rises; and on the other hand, there is the large outperformance versus the rest of the market, together with JC&C’s odd trading pattern. We’ll just have to wait and see what happens.
2 comments:
The curious case of Jardine & the STI
By R SIVANITHY
15 March 2010
Throughout all of last week, sharp rises in Jardine Matheson (JM), Jardine Strategic (JS) and Jardine Cycle & Carriage (JC&C) to new all-time highs helped push the Straits Times Index significantly higher on five successive days.
This elevated the STI to the position of standout performer in the region, outclassing even regional leader Hong Kong. More interesting, on the days when Hong Kong’s Hang Seng was weak, the STI kept powering higher.
Now, the Jardine stocks in question have small free floats - or are ‘tightly held’ if you prefer - and so their gains came with low volume traded. Moreover, in the case of JC&C, there has consistently been an odd trading pattern - more of this later - which has led observers to raise the possibility that something not quite right went on.
Any sense of bewilderment, however, was tinged by an equal amount of quiet resignation, mainly because sudden, strange movements in the Jardine stable have been a common sight in the past and the market has grown used to them.
One dealer said ‘here we go again’ when watching how JC&C rose 78 cents or 3.1 per cent to $26.30 last Monday, exhibiting a pattern that was manifested again on Friday when the stock rose to within touching distance of its all-time high, adding 28 cents to $27.62 with 238,000 shares traded.
The pattern in question was that a large number of trades were of only one lot each as the counter ticked inexorably higher each day throughout the week, a near-relentless climb that led many observers to question whether price-fixing of sorts was occurring. It has to be pointed out, however, that this pattern is a very familiar one, having been a feature of the counter’s daily trading for years.
Highs and lows
Similarly, JM’s and JS’s rises to their all-time highs have come with low volume - JM last week shot up US$4.30 or 15 per cent to US$33.40 on average daily volume of just 494,000 shares, while JS’s gain of US$2.50 or 15 per cent to US$19.58 came with an average daily turnover of 312,600 units.
The first and most obvious question is, of course, why stocks as illiquid as these - or with such small free floats - should still be permitted to retain membership in the STI since active trading is a central index requirement.
Apparently, there are no easy answers to this because of certain technicalities; so for now, it has to remain an issue for the index’s guardians to ponder, especially when there appear to be more suitable and actively traded candidates in the STI’s reserve list that was released last week.
Second, there was accompanying positive research that was issued after Jardine announced better-than-expected results a little more than a week ago - Citi Investment Research, for example, issued upgrades on JS, JM and others within the stable. These were partly based on the figures released but also because of a share buyback scheme that has led to speculation of a possible JS privatisation which Citi said could address the ‘huge discount’ at which JS trades.
Were ‘buy’ reports on some Jardine stocks sufficient to account for the vast outperformance enjoyed last week? To answer a question like this, one would have to study past responses to analyst reports and/or good earnings figures and like the issue of index membership, it is not one that can be easily answered.
Sophisticated software
It is really a question for SGX’s market surveillance teams to ponder and in this connection, it’s worth noting that the exchange’s regulatory division has at its disposal some pretty sophisticated software that can detect many suspicious patterns in trading, so if there was something untoward behind the rises, chances are good that alarm bells would have rung inside SGX.
However, being a frontline regulator with no real legislation-backed enforcement teeth places the exchange in the awkward position of being unable to disclose any of its investigations unless those above it in the regulatory pecking order, mainly the Monetary Authority of Singapore, have given the green light.
So it’s safe to say that at the very least, the exchange is fully aware of the market’s concerns when it comes to sudden, odd share price movements, not just Jardine, and actually spends a fair bit of time scrutinising such rises or falls.
In Jardine’s case, it surely has looked at the deals last week and, depending on its findings, may or may not have decided to probe further. On the one hand, there was accompanying research and solid results to account for some rises; and on the other hand, there is the large outperformance versus the rest of the market, together with JC&C’s odd trading pattern. We’ll just have to wait and see what happens.
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