Manipulated Counters?

Finally, a real scoop from The Edge: The fall from grace of UK-registered financial institution, Global Trader Europe Ltd, has had a far-reaching impact on certain Malaysian stocks and sparked off investigations of possible manipulation of these counters, sources said. It is understood that at least nine companies on Bursa Malaysia have been adversely impacted by “forced selling” of stocks that are pledged to Global Trader in return for a leveraged line of credit. The heavy selldown of these stocks is said to have caused the authorities to start investigation on possible manipulation. Towards this end, several brokers have been quizzed by the authorities.

“It is not known how many more companies have shares pledged with Global Trader, which had been actively dishing out lines of credit to Malaysian investors last year,” said a source. Shareholders of the affected companies are said to have pledged their shares to Global Trader’s office in Bangkok. Following the liquidity crunch faced by its parent company in the UK, the administrators scrutinised the accounts of its clients, especially in its Bangkok branch. It sold the pledged shares and other assets of accounts that had a margin shortfall.

This in turn triggered a massive forced selling of the stocks that were pledged. Companies affected are said to have included:

H-Displays
Ygl Convergence
My EG Services
Reliance Pacific
Aturmaju Resources
Liqua Health Corp
Cymao Holdings
Axis Incorporation

The most noticeable casualty is H-Displays, a Mesdaq-listed company which saw some RM270 million of its market capitalisation wiped out in three days. Last Monday, the stock was trading at RM1.57 and had a market capitalisation of RM329.7 million. Last Friday, it closed at 29 sen, with a market capitalisation of RM60.9 million. A check on H-Displays’ annual report shows that Hitech Ventures Pte Ltd, the controlling shareholder of H-Displays with some 51.2% equity, had pledged about 13 million of its 107.6 million shares.

It is understood that Merrill Lynch, which had been hired to assist Global Trader in its asset recovery process, had been involved with the sell order. My EG Services meanwhile, tumbled some 22% over the past two weeks, shedding close to RM67 million in market capitalisation.
Yet another Mesdaq-listed company, Ygl Convergence lost 69% in market capitalisation through last week, after its price fell from 57 sen on Monday down to 17.5 sen last Friday.

Global Trader was placed under special administrators in mid-February after one of its clients defaulted on a margin call, which resulted in Global Trader having a deficiency in its capital requirements.