Published April 10, 2009

SEC outlines moves to curb short selling

Aim is to restore investor confidence in markets

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(NEW YORK) Seeking to restore investor confidence in the markets, securities regulators made several proposals on Wednesday that would restrict investors from betting on a stock's decline at specific times.

Not right up their street: Many market participants, including hedge funds, maintain that short-selling adds liquidity to the market

The proposed rules are meant to curb potentially abusive market activity and have been supported by financial institutions and other companies, which have experienced sharp declines in their shares.

The Securities and Exchange Commission announced five proposals to curb the practice of so-called short-selling, including a modified version of a Depression-era rule that prevents investors from shorting a stock when its price is already declining.

That restriction, known as the uptick rule, was repealed in 2007 after regulators determined that it was not effective at stopping abusive trading practices.

Short-selling involves borrowing stock and selling it in the hope that price declines. If the stock drops, the investor benefits from buying it back at lower price.

One proposal made by the commission resembles the old uptick rule and another imposes a so-called bid test, which would permit short-selling only when the last offer to buy a stock is rising. Another proposal, backed by the nation's major stock exchanges, would impose a 'circuit breaker' that prohibits short-selling for the rest of the day only after a stock's price has declined by 10 per cent or more.

In an open meeting of the SEC on Wednesday, several commissioners said they were not convinced that the repeal of the old uptick rule had anything to do with the current volatility in the market. The commissioners will seek comments from the public over the next 60 days.

'This is an issue that has both strong supporters and detractors, and we will be very deliberative in our effort to determine what is in the best interest of investors,' the SEC's new chairwoman, Mary L Schapiro, said in a speech this week. 'In addition to seeking comments on the new proposals, we will also convene a roundtable to seek a range of views from many experts on the topic.'

Many market participants, including hedge funds and others, have maintained that short-selling adds liquidity to the market and serves an important function in ensuring that stock prices accurately reflect investor demand.

Reinstatement of the prior uptick rule 'is only a partial solution' to abusive short-selling because it does not cover equity swaps and other financial derivatives that provide the same economic benefit as short-selling, said Commissioner Luis A Aguilar.

He called for Congress to give the commission power to oversee such derivatives.

Last year, the commission imposed a series of temporary and hastily drafted bans on short-selling for certain financial companies after pressure from Wall Street firms and the Treasury secretary at the time, Henry M Paulson Jr.

But researchers at the University of Southern California and the University of Alberta argued in a recent study that the short-sale ban caused price inflation of at least US$4.9 billion in the stocks covered, which at the time included Fannie Mae and Freddie Mac. 'The creation of a bias toward long sellers is inconsistent with fair markets,' the researchers wrote. -- NYT

Published April 10, 2009

PM signals downgrade for economic outlook

But retrenchment and jobless numbers are looking better than expected

By TEH SHI NING

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(SINGAPORE) Singapore's economic forecast will have to be revised downwards as export levels remain depressed in this global recession, Prime Minister Lee Hsien Loong said yesterday.

But retrenchment and unemployment numbers are looking better than expected.

Speaking to reporters after his visit to NTUC's Employment and Employability Institute (e2i), PM Lee said that the current forecast of a 2 to 5 per cent contraction will be downgraded again when the Ministry of Trade and Industry releases Q1 GDP figures next Tuesday, but he does not expect it to fall into double-digits.

PM Lee also said that it remains uncertain when America, and the global economy, would begin to recover.

There is good news on the jobs front though. The number of layoffs, likely to exceed 10,000 for the first quarter, is lower than expected.

'We expected a very big wave of retrenchments, particularly after the Chinese New Year,' he said. 'But so far, the retrenchment and unemployment numbers have been better than we had feared. And I think the efforts which we've put in must have something to do with this.'

These include the Jobs Credit scheme and Spur (Skills Programme for Upgrading and Resilience), which provide grants and subsidies to help employers save jobs and workers to upgrade their skills.

It was to see these schemes in action, that he visited e2i to observe job seekers at training workshops yesterday, PM Lee said. 'I'm happy to see that the system is running well . . . and that people here are in good spirits, making the effort, willing to go out of their comfort zone to learn something, try something different, and find a job in this environment.'

Labour chief Lim Swee Say, who visited e2i with PM Lee, said that at the four-week-long peak of the first wave, 800 to 900 workers in the unionised sector were being retrenched each week. Retrenchments have since stabilised at about 200 to 300 a week, after job-saving measures kicked in.

But Mr Lim warned against assuming that it would stay that way, adding that a second wave of retrenchment will come. 'We have to double efforts to help retrenched workers gain employment. Our concern is that the unemployment rate may rise, not because we don't have enough jobs, but due to a mismatch between jobs supply and skills supply.'

When asked if additional off-Budget measures are on the cards as May Day approaches, PM Lee said that it is premature to speak of extra measures as those under the $20.5 billion Resilience Package are being rolled out and are showing results.

Published April 9, 2009

Najib still finalising his ministerial line-up

Smaller Cabinet, fewer coalition seats likely

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(KUALA LUMPUR) Malaysia's new premier Najib Razak is still finalising his new Cabinet and there was no announcement yesterday as expected, reports and officials said.

Mr Najib, who is tipped to unveil a streamlined Cabinet aimed at helping him push through promised reforms, may make the announcement today before travelling to Thailand for a regional summit.

'There is no Cabinet reshuffle announcement today. The earliest will be tomorrow,' a senior government official told AFP on condition of anonymity.

The convention is for Mr Najib, who was sworn in last week, to seek the consent of Malaysia's king before announcing the new Cabinet.

The New Straits Times yesterday reported that the premier, who leads the ruling United Malays National Organisation (Umno), has yet to meet with all its partners in the Barisan Nasional coalition on the formation of his new line-up.

Local media have speculated that Mr Najib is likely to reveal a slimmed-down Cabinet from the current 27 ministries with 32 ministers, and that coalition parties have been told they may get fewer seats.

Insiders said that Mr Najib is likely to retain the finance portfolio - seen as critical during the global economic crisis - and that Umno deputy leader Muhyiddin Yassin is tipped to be deputy prime minister and defence minister.

Mr Najib has unveiled an ambitious agenda to overhaul Umno, which was humbled in elections last year by voters who see it as corrupt and out of touch. -- AFP