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Institutional making huge profit by pressing down call warrant.
JCY share slides 6% on force-selling, market-maker activity
Business & Markets 2012
Written by Ho Wah Foon of theedgemalaysia.com
Monday, 24 September 2012 15:59
KUALA LUMPUR (Sept 24): JCY International Bhd, a favourite stock by day-traders and contra-players, continued to fall in afternoon trade on force-selling and market-maker activity after opening lower in early trade, according to dealers.
"Four (trading) days ago, many people thought the stock was cheap when it was sold down to 94 sen, but it fell further. Today, the contra players are forced to sell the stock or the stockbroking firms will sell them," said a dealer.
Under the T+3 settlement rule, players would have to pay yesterday to take up the stock. If they had not paid up to pick up the shares or had not sold their shares yesterday or this morning, their holdings would be force-sold by stockbroking firms this afternoon. At 3.44 pm, the leading HDD maker was trading at 81 sen, down 5.5 sen or 6.4%, after touching a low of 80.5 sen. The third most active stock saw 18.22 million shares exchanging hands.
Last Thursday, the stock already came under pressure due to profit-taking after it was played up to above RM1.01 previously.
Dealers said there are also signs that the market-making activities by institutions today are also causing the fall of JCY by selling down the share and making profit profit.
When a mother share falls, it will trigger a fall in its call warrants.
"They are making profit by incurring a small loss in JCY mother share, but gaining profit from the bigger percentage fall in the warrants. These institutions must have sold warrants at higher prices days before and picking up the much cheaper warrants now," one dealer working for an institution said.
In fact, JCY saw the dumping of its shares by funds in August on the back of its weaker results, dim outlook for the HDD sector and a downgrade by CIMB.
Despite enjoying a lower target price of RM120-RM145 by leading stockbroking houses, JCY has continued to decline since.