The dreadful call

After witnessing the sell down of Axis from RM1.66 to RM0.35 or -79% within 3 market days and finally seeing it suspended on the 4th day(refer here for other possible reasons), I have started to take a keen notice of the major losers during the trading hours. The main reason was to check whether there is any "domino effect" to other stocks. True enough, one counter that has been affected today was AturMaju(also attracted the attention of Bursa). Its share price plummeted from RM0.695 to RM0.395 or -43% nearing mid day.(refer price movement chart above) This prompted Bursa to issue an UMA Query(Unusual Market Activity) to AturMaju which the company promptly replied during lunch break. The reply was the usual stuff...not aware of this and that. So soon after market starts in the 2nd half, Aturmaju shares came up strongly and it created more than 5 million shares traded compared to its daily average of 30,000 shares! The "buyers" bought the shares till there were no more sellers available at the end of the closing bell! It closed unchanged as if nothing happened at RM0.695. What really happened to this usually illiquid and family owned stock which caused such volatility?

I ask myself whether AturMaju's selling was similar to Axis's which was one of the infamous 8 companies "related" to Global Trader sell down due to margin calls on accounts in March this year (discussed here before). Curiously, I search through the 8 companies' List of 30 Largest Shareholders because this is were I could find out more about the share margin accounts. In addition, the companies latest financial results and announcements were also scrutinised. Here are the glaring findings. Among the 8 companies, 3 companies stand out "calling". AturMaju has 25 largest shareholders whose shares are in margin accounts, Axis has 19 while RPB has 13.(RPB is "next"?) Does the sell down today and days before(for Axis) have something do with insider information or some of the shareholders are really having financial problems and as a result sell down of shares to redeem money back to the financiers? Having many pledge securities account holder in the top 30 list is "dangerous" as it creates a snowballing effect to the share price when these shareholders starts selling if something goes wrong. Remember these shareholders are taking loans to finance this shares. They would have to top up or face force selling. It will be worse if the share trading is illiquid. With respect to Aturmaju, could the reason why it recovered so quickly today is due to major margin shareholders propping up the shares above the margin call level to avoid the dreadful margin call? Will Bursa have a close follow up and reveal to the investing public the reason for such selling and volatility in the first place? It will definitely help to educate the investing public some of the unwritten rules in investment. Knowing Bursa, from the last Global Trader sell down, the findings will probably be no where in sight! MyTake: "Never invest in companies which are illiquid and especially so if they have a big number of margin accounts in its "List of 30 Largest shareholders"

* FT.com: The number of Indian companies listing on the London Stock Exchange is expected to jump by 20% (in which USD1b will be raised) as the Indian economy continued to struggle with inflation and slowing global growth.

* WSJ: General Motors is reducing its salaried head count by 5,000 or 15% of the company's white collar workforce by November as part of the planned cost cuts.

* Reuters: Taiwan's cabinet today approved China's institutional investors to buy into its market in a sign of improving business ties on both sides. "With money, you will gain respect and admiration". How true!

* AP: The US Fed said yesterday it will extend its emergency borrowing program for Wall Street firms by several months and the ECB and the Swiss National Bank will take a similar route. Also to note, the SEC has extended an emergency rule through August 12 to curb abusive short -selling in 19 financial services companies including Fannie and Freddie. Propping up the markets by force??