SOMEONE out there is licking his wounds after taking an almost $1 million hit after a naked short-selling adventure that went badly wrong.
The Singapore Exchange (SGX) yesterday initiated a buy-in for a huge chunk of China Hongxing shares against a short-seller who had dumped the stock last Friday but failed to cover his position before the close of the session.
In all, the SGX yesterday bought-in some 13 million shares of the mainboard-listed Chinese sports shoes and accessories maker at around 35.5 cents per share.
This was to cover the short sale of an equal amount of shares at around 25 to 27 cents per share during last Friday's session.
Besides taking a loss on the price difference, the short-seller also took a hit on the transaction fee of $40 per block transacted, and a higher brokerage rate of 0.75 per cent on the deal.
Market insiders reckon the loss could stack up to around $1 million.
'It is just plain stupid for anyone to have engaged in naked short-selling in this kind of a market,' remarked one institutional dealer. 'The least they could have done is to get scrip borrowing facilities lined up before shorting the stock.'
No one whom BT contacted could say who Friday's short-seller was, but speculation centres on hedge funds.
Intra-day short-selling is quite common on the SGX, and institutions which do overnight short-selling avail themselves of scrip borrowing-lending (SBL) facilities earlier. OCBC Securities has the largest SBL account facility here.
What also baffled many market insiders was the fact that the short-selling was done at a historic low price for the stock - something which would have immediately raised eyebrows and attention.
China Hongxing, which a year ago was trading at around $1.40, has been on a seemingly inexorable decline over the past 12 months, in tandem with the market. It closed at 33.5 cents yesterday, a two-cent gain, on a volume of 60.4 million.
