SC probes plunge in share prices


  • Business
  • Friday, 13 May 2005

BY JAGDEV SINGH SIDHU

The collapse of the share prices of a number of companies on Bursa Malaysia has caught the eye of the securities industry's top watchdog. 

The Securities Commission (SC) said in a statement yesterday that it viewed seriously the recent disruptive price movements in the market and had initiated investigations into the matter. 

“The maintenance of a fair and orderly market is of paramount importance and the SC is working closely with the exchange and market intermediaries, including stockbrokers, to maintain market integrity and high standards of market conduct,'' it said. 

The prices of a number of lower liners crumbled after shares in Fountain View Development Bhd began to collapse last week. Fountain View shares have lost 92% in value in just 10 trading days – from RM4.84 to 40 sen. 

The plunge in Fountain View triggered a massive selldown in shares such as Seal Inc Bhd, Golden Plus Holdings Bhd and Foremost Holdings Bhd. 

A head of research said that market sentiment and confidence among retail investors were now extremely low, adding that there was a lot of talk about how such stocks could have fallen so sharply and quickly. 

The reasons for the sharp reversal in such stocks, which are now literally penny stocks after their steep fall, are still unclear but market talk suggests that credit lines or support from syndicates were cut off. 

Analysts said the repercussions of the losses in these speculative stocks might eventually appear in the books of some brokers and unit trust companies.  

Some investors are of the view that the authorities should have been more vigilant in their monitoring of trading in stocks that might not warrant lofty valuations. 

The SC said it was reviewing risk management practices, compliance systems and the application of the know-your-client rule by market intermediaries. 

“The SC reminds all intermediaries and participants of their role and responsibilities in upholding market integrity. The SC will take appropriate action to punish wrongdoers,'' it said. 

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