DAYS OF INFAMY

Explains
The pounding of the pennies
In Singapore’s blue chip-dominated stock market, penny stocks often make a lot of noise but
little impact on the overall market. All of that changed on Oct 4, 2013, when the unexpected
collapse of a number of stocks sparked a sell-off among smaller counters and a shockwave of
changes for the rest of the market. Notwithstanding the Singapore Exchange’s unusual
intervention measures, regulators are pursuing changes that will change the fundamental nature of
the Singapore market in areas like contra trading. Several individuals and companies are also under
the spotlight of a police investigation and numerous lawsuits.
Sept 26, 2013: UOB Kay Hian imposes online trading curbs on 14 securities, including Asiasons, Blumont and LionGold shares
Oct 4, 2013: SGX suspends Asiasons, Blumont and LionGold after their shares collapse
Oct 7, 2013: SGX designates Asiasons, Blumont and LionGold
Oct 21, 2013: SGX removes designation
Oct 24, 2013: MAS, SGX confirm review of crash
Nov 1, 2013: Lawsuits begin to emerge. Among the largest is Interactive Brokers’
US$68m claim against at least 10 clients
Feb 7, 2014: MAS, SGX propose sweeping rule changes
April 2, 2014: CAD launches investigation
Indexed closing stock
price (Aug 1, 2013 = 100)
300
200
100
0
Aug 1, 2013
Sept 1
Oct 1
Nov 1
Dec 1
Jan1, 2014
Feb 1
Mar 1
Apr 1
2013
S$2.70
Asiasons
Oct 3
2014
99%
S$0.033
2013
S$2.02
Blumont
Oct 3
2014
98%
S$0.031
2013
S$1.51
LionGold
Oct 3
2014
97%
S$0.042
May 1
June 1
July 1
Aug 1
Sept 1
Oct 1
BIG CHILL
DAYS OF INFAMY
Although the price impact was contained, the hit on liquidity has been more profound. Market activity has dried
up, especially for smaller counters. The average value per traded share was 57 Singapore cents in September
2014, compared to 29 Singapore cents a year earlier, suggesting a shift in the market toward larger counters.
The market has yet to recover.
One year ago, the market
pounded its pennies into a
hole. Just how deep was that
hole? Compared to other
major market events in
Singapore, the overall price
impact of the penny meltdown
seemed benign. But that was
largely because the damage in
2013 was mostly confined to
smaller counters.
August 2013 = 100
Average daily trading volume
August 2013 = 100
180
140
160
120
140
120
Hong Kong
80
80
60
Singapore
1.7b shares
-67% y-o-y
40
20
Hong Kong
100
100
60
Average daily trading value
Singapore
S$957m
-34% y-o-y
40
One-day STI* loss
20
0
0
A S O N D J
2013
F M A M J
2014
J A S
A S O N D J
2013
F M A M J
2014
J A S
UNDER PRESSURE
GAME CHANGE
The saga has also set off a legal maelstrom. In April,
the white collar-crime fighting Commercial Affairs
Department conducted an unprecedented sweep
to seek information on 13 individuals as part of
its investigation into the penny saga. The probe is
ongoing. Separately, at least 10 banks and brokers
have taken legal action against clients.
The biggest impact of the penny meltdown
so far has come in the form of regulatory
changes. Some of the adjustments that have
been proposed by the Singapore Exchange
and the Monetary Authority of Singapore
were planned before Oct 4, 2013, but their
announcement was accelerated
as a result of that fateful day.
Targeted
in CAD
probe
James Hong Gee Ho
Blumont: Former executive director
Neo Kim Hock
Blumont: Former executive chairman
Peter Chen Hing Woon
Blumont: Director of business and
corporate development
Lynne Ng Su Ling
Blumont: Former independent director
LionGold: Independent director
ITE Electric: Former secretary
Wong Chin-Yong
Innopac: CEOAnnica: Shareholder
Koh Teng Kiat
Magnus Energy: Former COO
Luke Ho
Magnus Energy: CFO
Trade with caution
SGX will issue a ‘Trade with caution’
announcement if issuers cannot explain
unusual trading acitivity questioned
by the exchange
Status: Implemented March 2014
Board approval of replies
to trading queries
Directors must approve an issuer’s reply
to the exchange's queries about unusual
trading activities
Status: Implemented March 2014
Early notification of major deals
Issuers must give SGX early notification of
discussions or negotiations that could
lead to a major deal
Status: Implemented March 2014,
codification expected in March 2015
Trading restriction disclosure
Securities Association of Singapore to develop
disclosure guidelines for brokers’ trading
restrictions on stocks
Status: Industry guidelines expected
by end-2014
Quah Su-Yin
ISR Capital: CEO
Ho Cheng Leong
ITE Electric: Former CEO
Ang Cheng Gian
ITE Electric: Former COO
Goh Hin Calm
ITE Electric: Former independent director
Annica: Independent director
Edwin Sugiarto
Annica: Chairman
Lim Meng Check
Annica: Former CEO
Quah Su-Ling
Ipco International: CEO
Lee Chai Huat
Powerlite Ventures: Former shareholder
(sold to Blumont)
Cheng Wah
Nelson Fernandez
Acadian Mining: Former shareholder
(sold to LionGold)
Kuan Ah Ming
Tan Boon Kiat
Ooi Cheu Kok
Blumont: Shareholder
No of
reported
lawsuits faced
Independent enforcement
committees
Listing, disciplinary and appeals committees
could help SGX to address concerns about its
dual role as a for-profit market operator
and a regulator.
Status: Target implementation by Q1 2015
Minimum trading price
Raise the minimum trading price on the
mainboard to 20 Singapore cents per share.
Status: Consultation, targeted
implementation around March 2016
Collateral requirements
Brokers to impose 5 per cent collateral
requirement, ending the practice of
unsecured contra trading.
Status: Targeted implementation in mid-2016
Faster settlement
Shorten settlement period to T+2 from T+3
Status: Consultation and details
to be announced
-12.1%
Black
Monday,
Oct 19, 1987
-11.9%
Pan-Electric
collapse,
Dec 5, 1985
-3.9%
Clob and Malaysia
currency controls,
Sept 1, 1998
-3.3%
Lehman Brothers
bankruptcy,
Sept 15, 2008
-1.0%
Barings scandal,
Feb 27, 1995
-0.5%
China Aviation Oil shock,
Nov 30, 2004
-0.2%
Penny meltdown,
Oct 4, 2013
* Straits Times Industrial Index before 1998
Source: Bloomberg, Shareinvestors.com, Singapore Exchange, Hong Kong Exchanges and Clearing, company announcements and annual reports BT Graphics: Kenneth Lim, Simon Ang & Jonathan Goh
Explains
The pounding of the pennies
In Singapore’s blue chip-dominated stock market, penny stocks often make a lot of noise but
little impact on the overall market. All of that changed on Oct 4, 2013, when the unexpected
collapse of a number of stocks sparked a sell-off among smaller counters and a shockwave of
changes for the rest of the market. Notwithstanding the Singapore Exchange’s unusual
intervention measures, regulators are pursuing changes that will change the fundamental nature of
the Singapore market in areas like contra trading. Several individuals and companies are also under
the spotlight of a police investigation and numerous lawsuits.
Sept 26, 2013: UOB Kay Hian imposes online trading curbs on 14 securities, including Asiasons, Blumont and LionGold shares
Oct 4, 2013: SGX suspends Asiasons, Blumont and LionGold after their shares collapse
Oct 7, 2013: SGX designates Asiasons, Blumont and LionGold
Oct 21, 2013: SGX removes designation
Oct 24, 2013: MAS, SGX confirm review of crash
Nov 1, 2013: Lawsuits begin to emerge. Among the largest is Interactive Brokers’
US$68m claim against at least 10 clients
Feb 7, 2014: MAS, SGX propose sweeping rule changes
April 2, 2014: CAD launches investigation
Indexed closing stock
price (Aug 1, 2013 = 100)
300
200
100
0
Aug 1, 2013
Sept 1
Oct 1
Nov 1
Dec 1
Jan1, 2014
Feb 1
Mar 1
Apr 1
2013
S$2.70
Asiasons
Oct 3
2014
99%
S$0.033
2013
S$2.02
Blumont
Oct 3
2014
98%
S$0.031
2013
S$1.51
LionGold
Oct 3
2014
97%
S$0.042
May 1
June 1
July 1
Aug 1
Sept 1
Oct 1
BIG CHILL
DAYS OF INFAMY
Although the price impact was contained, the hit on liquidity has been more profound. Market activity has dried
up, especially for smaller counters. The average value per traded share was 57 Singapore cents in September
2014, compared to 29 Singapore cents a year earlier, suggesting a shift in the market toward larger counters.
The market has yet to recover.
One year ago, the market
pounded its pennies into a
hole. Just how deep was that
hole? Compared to other
major market events in
Singapore, the overall price
impact of the penny meltdown
seemed benign. But that was
largely because the damage in
2013 was mostly confined to
smaller counters.
August 2013 = 100
Average daily trading volume
August 2013 = 100
180
140
160
120
140
120
Hong Kong
80
80
60
Singapore
1.7b shares
-67% y-o-y
40
20
Hong Kong
100
100
60
Average daily trading value
Singapore
S$957m
-34% y-o-y
40
One-day STI* loss
20
0
0
A S O N D J
2013
F M A M J
2014
J A S
A S O N D J
2013
F M A M J
2014
J A S
UNDER PRESSURE
GAME CHANGE
The saga has also set off a legal maelstrom. In April,
the white collar-crime fighting Commercial Affairs
Department conducted an unprecedented sweep
to seek information on 13 individuals as part of
its investigation into the penny saga. The probe is
ongoing. Separately, at least 10 banks and brokers
have taken legal action against clients.
The biggest impact of the penny meltdown
so far has come in the form of regulatory
changes. Some of the adjustments that have
been proposed by the Singapore Exchange
and the Monetary Authority of Singapore
were planned before Oct 4, 2013, but their
announcement was accelerated
as a result of that fateful day.
Targeted
in CAD
probe
James Hong Gee Ho
Blumont: Former executive director
Neo Kim Hock
Blumont: Former executive chairman
Peter Chen Hing Woon
Blumont: Director of business and
corporate development
Lynne Ng Su Ling
Blumont: Former independent director
LionGold: Independent director
ITE Electric: Former secretary
Wong Chin-Yong
Innopac: CEOAnnica: Shareholder
Koh Teng Kiat
Magnus Energy: Former COO
Luke Ho
Magnus Energy: CFO
Trade with caution
SGX will issue a ‘Trade with caution’
announcement if issuers cannot explain
unusual trading acitivity questioned
by the exchange
Status: Implemented March 2014
Board approval of replies
to trading queries
Directors must approve an issuer’s reply
to the exchange's queries about unusual
trading activities
Status: Implemented March 2014
Early notification of major deals
Issuers must give SGX early notification of
discussions or negotiations that could
lead to a major deal
Status: Implemented March 2014,
codification expected in March 2015
Trading restriction disclosure
Securities Association of Singapore to develop
disclosure guidelines for brokers’ trading
restrictions on stocks
Status: Industry guidelines expected
by end-2014
Quah Su-Yin
ISR Capital: CEO
Ho Cheng Leong
ITE Electric: Former CEO
Ang Cheng Gian
ITE Electric: Former COO
Goh Hin Calm
ITE Electric: Former independent director
Annica: Independent director
Edwin Sugiarto
Annica: Chairman
Lim Meng Check
Annica: Former CEO
Quah Su-Ling
Ipco International: CEO
Lee Chai Huat
Powerlite Ventures: Former shareholder
(sold to Blumont)
Cheng Wah
Nelson Fernandez
Acadian Mining: Former shareholder
(sold to LionGold)
Kuan Ah Ming
Tan Boon Kiat
Ooi Cheu Kok
Blumont: Shareholder
No of
reported
lawsuits faced
Independent enforcement
committees
Listing, disciplinary and appeals committees
could help SGX to address concerns about its
dual role as a for-profit market operator
and a regulator.
Status: Target implementation by Q1 2015
Minimum trading price
Raise the minimum trading price on the
mainboard to 20 Singapore cents per share.
Status: Consultation, targeted
implementation around March 2016
Collateral requirements
Brokers to impose 5 per cent collateral
requirement, ending the practice of
unsecured contra trading.
Status: Targeted implementation in mid-2016
Faster settlement
Shorten settlement period to T+2 from T+3
Status: Consultation and details
to be announced
-12.1%
Black
Monday,
Oct 19, 1987
-11.9%
Pan-Electric
collapse,
Dec 5, 1985
-3.9%
Clob and Malaysia
currency controls,
Sept 1, 1998
-3.3%
Lehman Brothers
bankruptcy,
Sept 15, 2008
-1.0%
Barings scandal,
Feb 27, 1995
-0.5%
China Aviation Oil shock,
Nov 30, 2004
-0.2%
Penny meltdown,
Oct 4, 2013
* Straits Times Industrial Index before 1998
Source: Bloomberg, Shareinvestors.com, Singapore Exchange, Hong Kong Exchanges and Clearing, company announcements and annual reports BT Graphics: Kenneth Lim, Simon Ang & Jonathan Goh