Short selling on SingTel shares

On 12 April 2017, SingTel shares experienced heavy shelling by short sellers. On that fateful day, the short sales volume was 21.7 million, with market value of $82.7 million. The heavy attack led to a decline in SingTel share price from $3.84 to the current $3.75. What could have caused the big boys to do massive short selling on SingTel shares?

The short selling of SingTel shares was disturbing because it has been on-going for several weeks. From 3 to 7 April, there was 16.7 million of short sales volume, with total value of $65.4 million. The week before it was 21.7 million short sales with total value of $85 million being shorted. Prior to that, another ferocious attack occurred in the week 13 to 17 March, with 20.4 million short sales volume of $81 million value.

Stock investing

It may sound far-fetched to investors but the reason for the SingTel shares attacks could be attributed to short-sellers plotting to pull back the Straits Times Index (STI), which closed 0.98 percent lower on 17 April 2017. Being the stock market bellwether in Singapore, it makes sense for the big boys to target SingTel in a bid to engineer a stock market correction in Singapore.

Previously, I have posted a series of research on this telco giant in this blog. Readers may refer to the following links:

  1. SingTel shares to rocket on NetLink Trust IPO?
  2. SingTel share price in supreme form
  3. SingTel increased investment moats aggressively

Most investors would view short-selling negatively but nonetheless, such activity is needed to prevent market prices from becoming out of whack.

According to Monetary Authority of Singapore, short selling refers to the sale of securities that the seller does not own at the time of the sale, short selling may either be: ‘covered’ or ‘uncovered’ (also referred to as ‘naked’ short selling). In ‘covered’ short selling, at the time of the sale, the seller has borrowed the securities or has otherwise made arrangements to fulfil his obligation to deliver the securities. In ‘uncovered’ short selling, at the time of the sale, the seller is not in possession of securities or has not otherwise made arrangements to meet his delivery obligation.

Although there are positive effects of short selling, such activity may [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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