Cheap stocks with high market caps no longer subject to MTP probing: SGX

The bourse is also mulling a market-cap test.

Mainboard-listed companies will no longer be at the crosshairs of the minimum trading price rules and face delisting scares just because their 6-month volume-weighted average price dipped below $0.20.

According to a press release by the local bourse, it has reviewed the current MTP criteria to assess if the objective of reducing the risk of excessive speculation and potential manipulation can be achieved in a more calibrated and effective way.

“SGX noted from the review that among companies with a 6-month volume-weighted average price (VWAP) of shares of less than S$0.20, those with market capitalisation of S$40 million or more showed better liquidity characteristics and lower volatility compared with companies with market capitalisation of less than S$40 million,” SGX noted.

The release added that this shows how the market capitalisation test as an MTP entry criterion will complement the existing requirement to more precisely achieve the goal of reducing excessive speculation and potential manipulation.

“The MTP requirement remains relevant to addressing the risks associated with lower priced securities. We have been considering market developments and feedback in the implementation of the requirement and made refinements along the way,” said Tan Boon Gin, chief regulatory officer at SGX.