THE IMPACT OF STOCK EXCHANGE QUERIES ON THE STOCK MARKET

Abstract

This study examines the impact of stock exchange queries issued by the Singapore Stock Exchange (“SGX”) and the Hong Kong Stock Exchange (“HKEx”) from the period of 2009 to 2012. Many questions have been raised over the effectiveness of stock exchange queries since majority of the responses to the query do not provide any new explanation. Stock exchange queries have also gained much public attention following the recent penny stock saga involving three SGX-listed firms – Blumont Group Limited (“Blumont”), Asiasons Capital Limited (“Asiasons”) and LionGold Corp Limited (“LionGold”). This study documents three significant findings. First, there is no reversal of stock price when a firm responds with no new explanation to a price query in Singapore. However, there is a reversal of stock price for responses to a price query following a pre-query price run-down in Hong Kong. Second, there are mixed results on the stock price movement following a response to a price query when firms respond with either a partial or detailed new explanation in Singapore. However, there is a continuation of stock price movement following a response which provides a detailed or partial new explanation in Hong Kong. Third, there is no significant market reaction to responses to disclosure queries.