Published December 31, 2008

CMT price hike appears to be due to hedging: SGX

Exchange probing if there was market misconduct and will act accordingly

By CHEW XIANG

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THE Singapore Exchange yesterday said that the sudden spike in CapitaMall Trust (CMT) share price on Monday appeared to be due to 'hedging activity' by an unnamed financial institution.

On Monday, two million CMT shares were traded at $3 just before the market closed. That is 87.5 per cent above the previous closing price of $1.60.

It was the stock's single largest daily gain and was its highest closing price since August.

The trade added 22 points to the benchmark Straits Times Index, which closed up almost 55 points on Monday at 1,780.57. Yesterday, CMT shed most of the gains, closing at $1.64, down $1.36 or 45 per cent. The STI fell 9.92 points to 1,770.65.

SGX said in its statement that it 'will investigate the possibility of any market misconduct and take up such action as may be necessary with the relevant authorities'.

CapitaMall Trust said in a statement yesterday that it had not announced any new information and did not know of any other possible explanation for the trading. It was responding to a query from the exchange.

Observers had said that the spike was likely to be due to an error trade, pointing out that CapitaLand, which manages the trust, was trading at just above $3. Others attributed it to window-dressing by investors as the year closes.

In May, one investor sold 400,000 United Overseas Bank shares at almost a dollar below the previously traded price just minutes before markets closed. UOB closed that day 98 cents down, taking 16.8 points off the STI.

And in May 2007, one trader keyed a mistaken order to sell 400,000 DBS Group shares at 27 cents - about $24 below its then trading price - which briefly triggered a 400-point fall in the STI. The trades were eventually cancelled.

SGX said earlier this month that effective next year, it would only review error trades involving losses of at least $5,000 and for a review fee of $500.

The exchange also said that all error trades must be reported to the SGX within 30 minutes of occurrence.