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21-03-2014, 04:00 AM
An honorable member of the Coffee Shop Has Just Posted the Following:
SGX’s PR spin on Olam takeover is indefensible (http://www.tremeritus.com/2014/03/19/sgxs-pr-spin-on-olam-takeover-is-indefensible/)
http://www.tremeritus.org/simages/dmca_protected_sml_120n.png http://www.tremeritus.org/wp-content/themes/WP_010/images/PostDateIcon.png March 19th, 2014 | http://www.tremeritus.org/wp-content/themes/WP_010/images/PostAuthorIcon.png Author: Contributions (http://www.tremeritus.com/author/contributor/)
http://www.tremeritus.org/wp-content/uploads/2012/06/christopher.jpg
Christopher Balding
As an academic who only has to deal with an institution that just wishes I
kept my mouth shut more but doesn’t really press the issue (with some very real
exceptions), I have the ability to speak the truth as I see it and not worry
about public relations. In a way I feel bad for public relation guys that have
to spin indefensible positions at the behest of their masters.
Last week after hearing about the impressive run up of Olam prior to the
Temasek buyout, I raised the possibility that the price gains prior to the
buyout raised concerns. Enter the Singapore Stock Exchange, who
released a statement (http://www.sgx.com/wps/wcm/connect/sgx_en/home/higlights/news_releases/SGX-clarifies-Olam-International-issue) saying that there was no concern about information
leaks because analysts had raised their price target for Olam. This is a weak
response at best because as the Wall Street Journal noted
Even after all those upgrades, the consensus target was only 1.68
Singapore dollars (US$1.33), according to FactSet, just a single Singapore cent
higher than at the start of the year and far below the S$2 the stock hit just
before the deal was announced.
Just to be clear, the Singapore Stock Exchange is claiming that an increase
in the consensus estimate to $1.68 explains the one month move from $1.43 to $2.
Interestingly, according to
Thompson/FirstCall, only two brokers changed their hold recommendations to
buy (http://finance.yahoo.com/q/ao?s=O32.SI+Analyst+Opinion) out of a total of 18 with buy/sell recommendations.
Let’s look a little closer at how fast the price moved presented below in
Figure 1 with all data normalized to 100 for ease of comparison and the data
spreadsheet here (http://www.baldingsworld.com/wp-content/uploads/2014/03/Olam-Public-0318141.xlsx).
http://www.tremeritus.org/wp-content/uploads/2014/03/Olam-Price.png
After hitting its recent low on February 4, Olam began an unprecedented and
rapid price increase. During the same time that Noble Group and Wilmar were
enjoying 12 and 14 percent increases, Olam enjoyed a 40% rise. Which if you
believe the Singapore Stock Exchange, was due solely to analysts raising their
consensus estimate to $1.68. Not only is the rapid and large price movement
suspicious, but so is the change in volume presented below in Table 1.
http://www.tremeritus.org/wp-content/uploads/2014/03/Olam-Volume-Table.png
Wilmar and Noble both had month to month changes in their average daily
volume, but nothing that would raise alarms. Olam’s volume, however, was quite
steady until the month before the buyout. During the month preceding
the buyout, average daily volume more than
tripled. During the same period, when Noble and Wilmar
received price upgrades, their volume increased but by significantly less.
It strains all credibility to breaking point to claim that daily volume and
price movements in Olam in the month prior to the Temasek buyout are due solely
to analyst upgrades which priced Olam at 25% less than the buyout
price. If the Singapore Stock Exchange wants to maintain any credibility it will
look into settlement data about who was buying Olam in the month prior to the
buyout.
The Wall Street Journal said it well writing “Nobody said explaining markets
is easy, but this begs another look.”
Indeed.
Christopher
Balding
* The writer is a professor of
business and economics at the HSBC Business School of the Peking University
Graduate School. An expert in sovereign wealth funds, he has published in such
leading journals as the Review of International Economics, the Journal of Public
Economic Theory, and the International Finance Review on such diverse topics as
CDS pricing, the WTO, and the economics of adoption and abortion. His work as
been cited by a variety of media outlets including the Wall Street Journal and
the Financial Times. Prof Balding received his Phd from the University of
California, Irvine and worked in private equity prior to entering academia. The
article first appeared in his blog, www.facebook.com/baldingsworld (http://www.facebook.com/baldingsworld).
Click here to view the whole thread at www.sammyboy.com (http://sammyboy.com/showthread.php?177570-SGX’s-PR-spin-on-Olam-takeover-is-indefensible&goto=newpost).
SGX’s PR spin on Olam takeover is indefensible (http://www.tremeritus.com/2014/03/19/sgxs-pr-spin-on-olam-takeover-is-indefensible/)
http://www.tremeritus.org/simages/dmca_protected_sml_120n.png http://www.tremeritus.org/wp-content/themes/WP_010/images/PostDateIcon.png March 19th, 2014 | http://www.tremeritus.org/wp-content/themes/WP_010/images/PostAuthorIcon.png Author: Contributions (http://www.tremeritus.com/author/contributor/)
http://www.tremeritus.org/wp-content/uploads/2012/06/christopher.jpg
Christopher Balding
As an academic who only has to deal with an institution that just wishes I
kept my mouth shut more but doesn’t really press the issue (with some very real
exceptions), I have the ability to speak the truth as I see it and not worry
about public relations. In a way I feel bad for public relation guys that have
to spin indefensible positions at the behest of their masters.
Last week after hearing about the impressive run up of Olam prior to the
Temasek buyout, I raised the possibility that the price gains prior to the
buyout raised concerns. Enter the Singapore Stock Exchange, who
released a statement (http://www.sgx.com/wps/wcm/connect/sgx_en/home/higlights/news_releases/SGX-clarifies-Olam-International-issue) saying that there was no concern about information
leaks because analysts had raised their price target for Olam. This is a weak
response at best because as the Wall Street Journal noted
Even after all those upgrades, the consensus target was only 1.68
Singapore dollars (US$1.33), according to FactSet, just a single Singapore cent
higher than at the start of the year and far below the S$2 the stock hit just
before the deal was announced.
Just to be clear, the Singapore Stock Exchange is claiming that an increase
in the consensus estimate to $1.68 explains the one month move from $1.43 to $2.
Interestingly, according to
Thompson/FirstCall, only two brokers changed their hold recommendations to
buy (http://finance.yahoo.com/q/ao?s=O32.SI+Analyst+Opinion) out of a total of 18 with buy/sell recommendations.
Let’s look a little closer at how fast the price moved presented below in
Figure 1 with all data normalized to 100 for ease of comparison and the data
spreadsheet here (http://www.baldingsworld.com/wp-content/uploads/2014/03/Olam-Public-0318141.xlsx).
http://www.tremeritus.org/wp-content/uploads/2014/03/Olam-Price.png
After hitting its recent low on February 4, Olam began an unprecedented and
rapid price increase. During the same time that Noble Group and Wilmar were
enjoying 12 and 14 percent increases, Olam enjoyed a 40% rise. Which if you
believe the Singapore Stock Exchange, was due solely to analysts raising their
consensus estimate to $1.68. Not only is the rapid and large price movement
suspicious, but so is the change in volume presented below in Table 1.
http://www.tremeritus.org/wp-content/uploads/2014/03/Olam-Volume-Table.png
Wilmar and Noble both had month to month changes in their average daily
volume, but nothing that would raise alarms. Olam’s volume, however, was quite
steady until the month before the buyout. During the month preceding
the buyout, average daily volume more than
tripled. During the same period, when Noble and Wilmar
received price upgrades, their volume increased but by significantly less.
It strains all credibility to breaking point to claim that daily volume and
price movements in Olam in the month prior to the Temasek buyout are due solely
to analyst upgrades which priced Olam at 25% less than the buyout
price. If the Singapore Stock Exchange wants to maintain any credibility it will
look into settlement data about who was buying Olam in the month prior to the
buyout.
The Wall Street Journal said it well writing “Nobody said explaining markets
is easy, but this begs another look.”
Indeed.
Christopher
Balding
* The writer is a professor of
business and economics at the HSBC Business School of the Peking University
Graduate School. An expert in sovereign wealth funds, he has published in such
leading journals as the Review of International Economics, the Journal of Public
Economic Theory, and the International Finance Review on such diverse topics as
CDS pricing, the WTO, and the economics of adoption and abortion. His work as
been cited by a variety of media outlets including the Wall Street Journal and
the Financial Times. Prof Balding received his Phd from the University of
California, Irvine and worked in private equity prior to entering academia. The
article first appeared in his blog, www.facebook.com/baldingsworld (http://www.facebook.com/baldingsworld).
Click here to view the whole thread at www.sammyboy.com (http://sammyboy.com/showthread.php?177570-SGX’s-PR-spin-on-Olam-takeover-is-indefensible&goto=newpost).