SGX should state stand on 'front-running'

PHOTO: SGX should state stand on 'front-running'


SINGAPORE - The circumstances surrounding the recent sell-down of vegetable seller China Minzhong Food Corp raise several concerns, given the financial losses one can potentially suffer ("China Minzhong shares dive"; last Tuesday).

Similar to the Olam case, a research firm is said to have shorted China Minzhong before releasing a damning report about it.

It is not a question of whether the report's allegations of significant and material deception are true or not; it is about whether the report would cause the stock price to fall in the first instance.

In this case, by "front-running" the market, such research firms hope to reap maximum profits from their actions, at the expense of other investors. This could have an indirect impact on remisiers.

As this is neither the first nor the last time a situation like this will occur, it would be instructive to other like-minded research firms, including broking houses that provide research materials, for the Singapore Exchange (SGX) to state its stand on the matter.

Such practices could be an affront to fair play or even illegal.

If the SGX agrees with this, it should look into tightening the loopholes to protect investors. This is provided there are no existing rules or policies in place that will effectively address the issue on the Singapore platform.

-Jimmy Ho Kwok Hoong

President of The Society of Remisiers (Singapore)

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