SYDNEY: Australian regulators have launched a probe into unusual trading of futures contracts ahead of last week’s market-sapping revelations by the country's largest life insurer and fund manager AMP Ltd.
AMP said last Thursday it would raise capital, take A$2.6bil in write-downs and quarantine its British operations into a separate listed company in an effort to protect the financial strength of its Australian and New Zealand arm.
The announcement took the market by surprise, and AMP shares slumped on Monday after a two-day trading halt, erasing 20 points from the benchmark S&P/ASX 200 index.
Regulators said much of that fall had already been priced-in according to June Share Price Index (SPI) futures.
The Australian Securities and Investments Commission (ASIC) said yesterday it was working closely with the Sydney Futures Exchange to investigate “unusual trading in SPI futures ahead of AMP Ltd’s announcement of its demerger plans”.
ASIC chairman David Knott stressed, however, that “we have not yet established any clear link between the SPI trading and AMP’s announcement.”
“I also want to emphasise there is no evidence that AMP itself was in any way concerned in the trading,” he added.
AMP lost about a quarter of its market value on Monday after completing a heavily discounted A$1.2bil share sale to institutions at A$5.50 a share. Its shares fell a further 4% to a fresh all-time low of A$5.38 in afternoon trade yesterday, a far cry from levels above A$18 a year ago.
Investors also called for an investigation by the Australian Stock Exchange (ASX), alleging the capital raising ran counter to guidance given by the company in March.
“AMP management hasn’t acted in the best interests of shareholders,” said Paul Kasian, HSBC’s chief investment officer, Australian equities. “They should be investigated for misleading the market. A lot of people invested on the view that they didn’t need capital, therefore there wasn’t a solvency issue, then they come out less than two months later and issue capital...it’s shocking.”
AMP, exposed to the British benchmark FTSE 100 index through its life insurance operations, had met with analysts and institutional investors in March to ease their concerns after it posted a calendar 2002 loss of A$896mil.
Protections were in place to prevent further erosion in the group’s capital base, AMP said, even if the FTSE fell as low as 3,000 from March’s seven-and-a-half year lows of around 3,400.
However, the ASX said there would be no formal investigation into AMP’s market disclosure practices.
“At this stage, it looks like AMP has met its continuous disclosure obligations,” an ASX spokeswoman said. – Reuters