There are about 3,000 to 4,000 daily readers for this blog but you will find that there are not that many comments or queries. I guess part of the problem is that I do shoot down questions or queries that are not well thought out, lol... Anyway, a reader did posed some interesting questions on fund managers and company owners. I will try to answer as best I could.
Digital Investor
Hello Dali, had been following your blog quite awhile and beside writing about those stocks, maybe it is time that you reveal what fund manager trying to do in the market. Here are some of the things that we see in the market and I try to understand what they're trying to do. I had been asking around and no one seem to know why...maybe you could:1. If you look at the daily bursa announcement, you can see that EPF will buy big qty of certain counters and sell it on the same day too or maybe few days later. Or they will sell and then buy back. In short, they're profiting from others instead of buying and hold. I dont see this happen with foreign funds investing in Bursa Malaysia. Although it is not illegal but dont you think that this is wrong way of fund management?
Comments: You will find big funds buying and selling the same shares in the same week, sometimes even in the same day. Usually, its to disguise their motives - they could be adding or selling positions. For some counters that are a bit illiquid, these funds are actually drumming up interest to offload or buy shares by being on both sides. Is it legal, its a gray area. Technically, if they pay full broke both ways and do not sell short, they are deemed OK, but a more vigilant regulator may see things differently. Is that "wrong", well that is hard to qualify, and really you cannot stop a fund from buying and selling if they pay full broke. I do agree that this gray area is more likely to be "wrong" as it helps to paint a distorted picture of the real activity behind these operations. If I was the regulator, I would keep a closer eye and try to wipe that out of the system as it affects the integrity of the market place.
2. The other "unhealthy" process happen in Bursa is blocking a particular counter price from going up or going down by parking big qty in the sell queue or buy queue. One good counter you can see this happen is with ytlpower. What is the purpose? Dont they want their share price to go up? For today, it is with Genting Malaysia, big sell and buy qty being park there and basically the price got no where to go.
Comments: Usually you can only park the shares, if you have the shares already, you certainly do not want to be caught short if these big sells get taken out. Again, you cannot stop people from parking big sizes to "deter prices from rising". Why would company owners want to do that, or it could be a substantial shareholder, or just a fund with a big position ... - they could be waiting to collect more shares, they could be "maintaining price trends" for a corporate action (rights issue, share placement, share issuance), or that they just do not think it is "time for action".
Another possibility is due to the market makers of called warrants, they have hedged positions and depending on their exposure, they may want to do that as well. Again, very legal, if you have the balls and resources, take them out, but I am sure they would be covered. To them, its not important if the shares go up or down as long as they are covered.
Comments: Usually you can only park the shares, if you have the shares already, you certainly do not want to be caught short if these big sells get taken out. Again, you cannot stop people from parking big sizes to "deter prices from rising". Why would company owners want to do that, or it could be a substantial shareholder, or just a fund with a big position ... - they could be waiting to collect more shares, they could be "maintaining price trends" for a corporate action (rights issue, share placement, share issuance), or that they just do not think it is "time for action".
Another possibility is due to the market makers of called warrants, they have hedged positions and depending on their exposure, they may want to do that as well. Again, very legal, if you have the balls and resources, take them out, but I am sure they would be covered. To them, its not important if the shares go up or down as long as they are covered.
3. Another method is to buy and sell big qty at basically the same price. What is the purpose? Dont they hv to pay broker fees?
p/s photos: Zhou Weitong
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