SGX clarifies hubbub about Olam's share price

Probe is still on-going.

SGX noted media commentaries on Olam’s share price increase over a six-week period prior to a general offer announced by Breedens Investments Pte Ltd, an indirect wholly owned subsidiary of Temasek (Holdings) Pte Ltd, on 14 March 2014 for all of Olam shares at $2.23 a share.

Here's what SGX had to say on the issue:

It is important to stress the responsibilities placed on potential offerors and/or listed companies when they are in confidential discussions that may lead to a potential takeover offer. Under the Singapore Code of Takeovers and Mergers, potential offerors and listed companies should monitor trading activities in their stocks closely and make immediate announcements if there appears to be a leak of information on the possible offer which is material.

Under SGX’s listing rules, listed companies may temporarily withhold material information relating to a matter under negotiation. However, companies should make an immediate announcement of the yet-to-be disclosed material information or call an immediate trading halt if market activities suggest that the requirement of strictest confidentiality is no longer satisfied.

From 3 March 2014, listed companies are also required to notify SGX on a confidential basis if they are in discussions which are likely to lead to a takeover. We do not discuss our dealings with regards to individual companies including notifications as required under the listing rules. If there are possible breaches of rules or requirements, we will investigate and take appropriate action.

Public query issued when trading activities cannot be explained

As explained in our Regulator’s Column of 25 February 2013, our “Write to SGX” commentary published in the Straits Times on 27 April 2013 and our Regulatory Announcement on 7 February 2014, SGX conducts real-time market surveillance to detect unusual price or volume movements of specific stocks. In determining whether price or volume movements are unusual, SGX will take into account a multitude of factors. These include macroeconomic factors, market sentiment, specific industry outlook and trends, company financials and company developments and analyst reports. SGX will issue a public query when trading activities cannot be explained by these factors.

Market commentaries noted that in the six weeks from 3 Feb 2014, Olam’s share price increased 34.8%, higher than those of its peers such as Wilmar International which rose 11.2% and Noble Group which rose 12.6% over the same period. During the period, the Straits Times Index rose 2.3%. Such comparisons should be conducted with care as the financials and outlook of individual companies may differ even if they are within the same industry. While we do not prescribe a view of value or pricing of stocks, we note that of the 13 analysts who issued reports on Olam in February 2014, seven raised their target price by an average of 10.4% with the highest increase being 21.4%. The 13 analysts had target prices of $1.50 to $2.00 for Olam. In the case of Wilmar, eight analysts raised their target price by an average of 2.6% with the highest increase being 4.8%. For Noble, one analyst raised the target price in February. Trading in these three stocks were within the price ranges set out in the research reports, suggesting they were trading within the general market view of these stocks with Olam shares reflecting a more positive market view.

We take a serious view of all market misconduct in breach of the Securities and Futures Act, including potential insider trading and manipulation activities. We will spare no effort in conducting investigations on possible transgressions and will cooperate with regulatory agencies to enforce the law against offenders.

We will continue to conduct robust real-time surveillance and work closely with statutory agencies to uphold a fair, orderly and transparent market.