Fund managers hit by penny-stock crash

Retail investors are not the only victims feeling the pain after the share price plunges of LionGold Corp, Blumont Group and Asiasons Capital when they resumed trading yesterday.

Even fund managers have been caught out in the carnage.

Bloomberg records show that New York-based asset manager Van Eck Associates owns about 6 per cent of LionGold as part of an exchange-traded fund it manages, which aims to give investors exposure to small and mid-cap gold mining companies.

Australia-based Macquarie Group - another big investor - owns about 4.78 per cent of LionGold. It is not known if Macquarie is a direct investor, or is holding the shares on behalf of its clients.

But with LionGold's 83.44 per cent share price plunge from $1.26 to 25 cents in the past two trading sessions, as it lost $1.19 billion in market value, Van Eck would have lost about $71 million, while Macquarie's loss works out to $56.7 million.

The Bloomberg records also show that Asiasons, which owns 8.72 per cent of LionGold, and Blumont, which shares a common director - Ms Ng Su Ling - with LionGold, have begun to attract an institutional following as well.

Both counters had lost about 85 per cent of their market value upon trading resumption yesterday.

US fund manager BlackRock owns 0.57 per cent of Asiasons, while Europe-based Invesco holds a 0.56 per cent stake in the company. In the case of Blumont, another US fund manager, Vanguard Group, owns 0.27 per cent of the company, while Van Eck holds a 0.15 per cent stake.

Traders said the fund managers were probably drawn to the three counters by their inclusions in stock indexes as their stock prices commenced their rocket-like ascent this year.

In a corporate presentation in August, LionGold highlighted that it had been included in the MSCI Small Cap Index. It also formed part of the FTSE ST Mid-Cap Index. Meanwhile, Blumont forms part of the FTSE ST Mid-Cap Index as well, while Asiasons is on the FTSE ST Small Cap Index and FTSE ST Catalist Index.

One dealer, who declined to be named, said: "With LionGold's inclusion in the MSCI Index, fund managers were compelled to buy the counter. Otherwise, they might find themselves underperforming the index as the counter shot up."

Sadly, this had turned out to be their undoing following LionGold's collapse in share price yesterday.

But as the stock trio crashed, they also took a heavy toll on the FTSE ST indexes. Since Friday, the FTSE ST Mid-Cap had lost 7.44 per cent, while the FTSE ST Small-Cap fell 7.2 per cent and the FTSE ST Catalist is down 8 per cent. In contrast, the blue-chip Straits Times Index edged down only 0.25 per cent.

engyeow@sph.com.sg

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