Securities Commission has failed in its statutory responsibility to promote fair and transparent securities market in not investigating manipulation in the late buying support on the KLSE

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Media Statement
by Lim Kit Siang 

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The Securities Commission has failed in its statutory responsibility to promote fair and transparent securities market when it has failed to  investigate manipulation in the late buying support on the KLSE.

Since 24th March 2001, I had called on the Securities Commission  to  investigate market manipulations in  the stock market in the previous three months through massive  institutional  purchases of  TMT stocks- Telekom Malaysia Bhd, Malayan Banking Bhd and Tenaga Nasional Bhd -  in last three minutes of trading to jack up the Kuala Lumpur stock exchange composite index (KLCI).

In the past month, I had given  three specific instances:
 

1. On 21st March 2001 when the local bourse had earlier in the day plunged to a 23-month low of 638.5 points  in early trading after investors dumped heavyweights, but  at the end of the day’s trading, the KLCI  rebounded strongly to close at 673.24 following institutional buying of  the Big Three “TMT” stocks - Telekom Malaysia Bhd, Malayan Banking Bhd and Tenaga Nasional Bhd - especially in the last three minutes of trading. It  had been conservatively estimated that RM19 million worth of purchases for the Big Three “TMT” stocks took place in the last three minutes on 21st March and that in the last 30 seconds, the KLCI  was pushed up 13.18 points from 660.06 to 673.24.
2. On 23rd March 2001, when some RM16 million of institutional interventions through the TMT stocks in the last two minutes before the end of trading pushed  up  the KLCI by two points in the last 30 seconds from 667.26 to 669.27 at 5 p.m.
3. On 2nd April 2001, some RM6 million institutional purchases of the TMT stocks in the last minute of trading pushed up the KLCI  by 4.77 points from 645.97 points at 4.59 p.m. to  650.74 points at 5 p.m. so that the Prime Minister, Datuk Seri Dr. Mahathir Mohamad could present the Third Outline Perspective Plan (OPP3) to Parliament the next day with a good KLCI index.

Although the market manipulations in  the stock market through massive  institutional  purchases of  TMT stocks- Telekom Malaysia Bhd, Malayan Banking Bhd and Tenaga Nasional Bhd -  in last three minutes of trading had stopped after April 2, 2001, Malaysians expect the Securities Commission to take actions for:

Firstly, a full, independent and public inquiry into stock market manipulations through the  three government-controlled TMT stocks of Tenaga, Maybank and Telekom - which  together make up almost 40 per cent of the index's capitalisation - particularly in the last few minutes of trading in  the first  three months of the year.

Secondly, a full public accounting as to what   are the funds running into millions and even tens of millions of ringgit involved in the last-minute institutional purchases to manipulate the KLCI - were EPF, Pensions Trust Fund, Tabung Haji and other government-linked funds and agencies involved?

The failure of the Securities Commission to investigate market manipulations in  the stock market  through massive  institutional  purchases of  TMT stocks in the final minutes of trading to jack up the Kuala Lumpur stock exchange composite index (KLCI) in the first quarter of the year  have greatly undermined investor and public confidence about its  independence, professionalism,  integrity and commitment to good corporate governance.

Can Ali explain why the Security Commission, and in particular its department AWAS which monitors all buyers and sellers on the KLSE, was so prompt to haul up ordinary remisiers or politically-unconnected brokers for  questioning for any irregular market price,  as for instance, if a counter at  RM5 suddenly ended trading at RM5.50 with one lot, but is to tardy and relucant to act on the suspicious last-minute multi-million ringgit manipulation of the KLSE in the first quarter of the year?

Ali said the "last-minute buying" on the KLSE does not necessarily constitute market manipulation as one cannot  punish investors for a "last-minute change of mind".

I agree, but did Ali come to this conclusion after a full investigation or had he already made up his mind that there was  nothing irregular or improper in such a phenomen in the KLSE in the first quarter of the year without the need for any investigations?

As Securites Commission Chairman, Ali cannot be unaware of Section 84 of the Securities Industry Act (SIA) 1983,which states that "no such person shall create... or do anything that is calculated to create... a false or misleading appearance for  active trading in any securities on a stock market", while Section 85 says "no person shall take part in... any number of  transactions in securities in the effect of... a) raising, b) lowering or c) pegging, fixing maintaining or stabilising the prices of securities... which may include the purpose of inducing other persons... to acquire or dispose the securities of  the corporation" and the opinion of legal experts that  prima facie, the last-minute buying on index-linked counters are offences under the SIA.

The Securities Commission should also explain what actions it has taken to prevent misuse of nominee accounts to manipulate the market.

For instance, Cartaban Nominees (Asing) Sdn. Bhd and HSBC Nominees (Asing) Sdn. Bhd are  very active player of the Tenaga stock.

These are their  shares transactions on Tenaga stock in March, 2001:
 

Tenaga:         Acquired        Disposed

Cartaban Nominees (Asing) Sdn. Bhd:
 
1.3.01          125,000         86,000
2.3.01          504,000         81,000
5.3.01          585,000         78,000
7.3.01          85,000          289,000
9.3.01          84,000          26,121
12.3.01         31,000          40,000
13.3.01         31,000          192,000
14.3.01         5,000           49,000
15.3.01         23,000          209,300
16.3.01         90,000          72,000
19.3.01         -               76,000

HSBC Nominees (Asing) Sdn. Bhd

1.3.01          -               263,000
2.3.01          566,000         389,000
5.3.01          84,500          361,000
7.3.01          -               168,000
8.3.01          16,000          116,000
9.3.01          31,000          161,000
12.3.01         63,000          146,000
13.3.01         87,000          87,000
14.3.01         -               66,000
15.3.01         -               31,000
16.3.01         38,000          156.000
16.3.01         26,400          -
19.3.01         2,000           285,000
20.3.01         -               339,000
21.3.01         -               217,000
22.3.01         80,000          -
22.3.01         -               50,000
23.3.01         69,000          21,000
27.3.01         -               350,000
28.3.01         169,000         34,000
29.3.01         101,800         8,000
30.3.01         42,000          3,000
30.3.01         28,800          189,000

CHASE Malaysian Nominees (Asing) Sdn Bhd

1.3.01          657,000         -
8.3.01          318,000         -
15.3.01         -               56,000
22.3.01         -               954,400

These are their  shares transactions on Telekom stock in March, 2001:
 
 
 

Telekom:       Acquired        Disposed

HSBC Nominees (Asing) Sdn. Bhd

15.3.01         -               68,000
16.3.01         -               151,800
19.3.01         6,000           115,720
20.3.01         -               47,000
21.3.01         -               71,000
22.3.01         60,000          35,800
22.3.01         5,000           5,000
23.3.01         52,000          256,000
27.3.01         -               552,000
28.3.01         116,000         53,000
 

These are their  shares transactions on Maybank stock in March, 2001:
 

Maybank:       Acquired        Disposed

Cartaban Nominees (Asing) Sdn. Bhd:

16.3.01         -               228,000
19.3.01         -               167,800
20.3.01         -               314,400
21.3.01         -               70,200
22.3.01         -               996,554
26.3.01         -               1,104,400
27.3.01         -               1,002,425
28.3.01         142,000         -
29.3.01         -               320,602
30.3.01         -               139.600
2.4.01          -               32,070
3.4.01          -               122,000
4.4.01          166,600         -
 

HSBC Nominees (Asing) Sdn. Bhd

15.3.01         20,000          241,900
16.3.01         -               485,800
19.3.01         2,000           132,600
20.3.01         -               294,200
21.3.01         4,000           122,200
22.3.01         40,000          7,000
23.3.01         57,000          221,300
27.3.01         6,000           202,000
28.3.01         -               375,600
29.3.01         97,400          179,000
30.3.01         26,000          200,400
30.3.01         -               249,800
2.4.01          10,000          197,400
3.4.01          8,000           296,000
4.4.01          489,000         242,600
 

CHASE Malaysian Nominees (Asing) Sdn Bhd

15.3.01         -               306,000
22.3.01         -               2,066,300
29.3.01         -               833,400

It is very clear from the massive transactons of these nominee companies in the TMT stocks, a full inquiry is in order to establish whether they play any role in the  late buying support of the KLSE through institutional  purchases of the  TMT stocks and if so, who are the beneficial owners of these nominee accounts.

In this connection, I am most shocked that the Employees Provident Fund also uses nominee companies to invest heavily in the stock market.  Can the EPF explain what percentage of its RM40 billion invested in equities are bought through nominee companies in the KLSE and the reason why it had to resort to nominee companies to hide its identity when operating in the stock market, raising disturbing questions of accountability, transparency and integrity.

(25/4/2001)