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JSE reviewing day of volatile trading

Jan 11 2018 17:55
Carin Smith

Cape Town - The JSE is aware of the recent volatility in the share prices of certain property companies and has noted various media reports regarding the possible reasons for this volatility, Shaun Davies, director market regulation at the JSE, told Fin24 on Thursday.

Fin24 reported earlier that property stock prices in general suffered a steep dip on the JSE on Thursday morning, before recovering somewhat by noon, on rumours that a US-based research firm was investigating a SA company.

The sell-off of property stocks was fuelled by rumours that Viceroy Research’s next target is a South African property company, according to EasyEquities trading specialist Bryan Stewart.

Viceroy Research released an exposé on Stellenbosch-headquartered global retailer Steinhoff in December, shortly after its CEO Markus Jooste abruptly resigned amid an accounting scandal.

Davies explained that the price of a listed security at any given time is a function of the information available to investors from multiple sources.  

"Market prices are sometimes influenced by rumours and speculation that are part of the normal information flow in financial markets. However, it is a market abuse offence in terms of the Financial Markets Act to make false statements about listed securities which mislead investors," said Davies.

"The mere existence of rumours which some investors decide to act on does not in itself point to any misconduct. There would only be cause for concern if a person knowingly spreads false information about a listed security which affected the value of that security."

He said as part of the JSE Market Regulation Division’s routine surveillance procedures it is indeed reviewing the trading activity in those shares which were very volatile the last few days and of which the price movements appear to be unrelated to any information from the relevant companies.

"If our review of the trading indicates that it would be necessary to establish the source of any price sensitive information that may have been distributed amongst investors and whether such information was factually correct, we will advise the Directorate of Market Abuse (DMA) at the Financial Services Board (FSB) accordingly in order for them to consider conducting further investigations," said Davies.

"Our review will also be influenced by any facts that may subsequently become known to the market regarding the subject of the rumours."

If the Market Regulation Division’s review of trading activity identifies any potential price manipulation it will advise the DMA accordingly.  

"We can only consider potential insider trading if price sensitive information regarding a listed company is published and it appears that one or more investors had access to that information before it was published and traded on it," said Davies.

"Therefore, until any price sensitive information is published regarding any of these companies, there is no reason for us to review the trading activity for potential insider trading."

The Market Regulation Division is currently reviewing the recent trading activity and has not at this stage provided any information to the DMA.

"Through the JSE Market Regulation Division’s surveillance monitoring and the DMA’s investigative processes, any form of market abuse that is identified will be appropriately dealt with.

"We cannot at this stage comment on whether there has been any form of misconduct that needs to be addressed in relation to rumours that may be circulating that may be influencing the price of the securities that you have mentioned,” concluded Davies.

Bloomberg reported earlier on Thursday that SA regulators are scrutinising trades prompted by speculation that Viceroy Research will release a negative report about one of SA’s stocks. This caused some shares to slip by more than 20%. Very little is known about US-based Viceroy or the people behind it, it said.

Tembisa Marele, a spokesperson for the FSB, confirmed to Fin24 that the board is working with the JSE in this regard.

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fsb  |  reits  |  jse  |  markets  |  equities
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