SINGAPORE Exchange Ltd, Southeast Asia's biggest bourse, plans to add circuit breakers by early next year after a plunge in shares of three commodity companies erased US$6.9 billion (RM21.95 billion) in market value over three days.
Under the proposal, trading of a stock will be halted for five minutes if it moves 10 per cent in either direction, the exchange said in an emailed response to queries. The bourse said it sought public feedback on the plan in June.
"We aim to introduce the dynamic circuit breakers by early next year subject to regulatory approvals," Joan Lew, a spokesman for the exchange, said yesterday.
The bourse imposed restrictions this week on the shares of Blumont Group Ltd, Asiasons Capital Ltd and LionGold Corp after they plunged.
Trading caps to prevent wild swings in the stocks will give investors time to assess their holdings, according to trading-network Liquidnet Holdings Inc and the Securities Investors Association of Singapore, the largest investor lobbying group in Asia.
Circuit breakers are "safeguards other markets have to allow time for investors to mull over the situation at hand to see if the information out there is sufficient to make an informed decision", said David Gerald, president of SIAS. "Investors will have an opportunity to quickly review their investment decision."
The city's plan for circuit breakers "should help minimise market manipulation", said Kelly Teoh, a strategist at IG Asia Pte, here. "The regulator can hold all directors responsible, including non-executives, or at least have the process in place to bring them in for questioning if the circuit breakers are breached more than once."
Blumont, which invests in minerals and energy, slumped 94 per cent over two trading days on October 4 and October 7. That shaved S$4.9 billion (RM12.5 billion) off its market value. Scrutiny of the stock began after it surged more than 1,000 per cent this year through September.
Asiasons, which last month bought a stake in US oil and gas producer Black Elk Energy Offshore Operations LLC, tumbled 96 per cent over the three trading days through October 8, shaving S$2.5 billion in market value.
LionGold, which yesterday cited its share volatility for terminating talks to buy South American gold explorer Minera IRL Ltd, plunged 87 per cent over the three-day period, wiping out S$1.2 billion in value. Bloomberg