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Closing auction to go soon

HONG Kong Exchanges and Clearing Ltd, operator of Asia's third-biggest stock market, will scrap the closing auction session on the exchange because of investors' concerns about last-minute fluctuations in prices.

"We've decided to suspend the closing auction session from March 23 because the market has expressed concerns about the volatility during those sessions," Paul Chow, chief executive officer of Hong Kong Exchanges, told reporters yesterday. "The Exchanges will continue to review the system."

The closing session, used by the exchange since May last year, has attracted criticism from lawmakers and investors who claim it distorts pricing. The session extends trading by 10 minutes from the original 4pm close, during which buy and sell orders are matched by an auction trading mechanism.

Four days after the closing auction was introduced, eight stocks moved by more than 10 percent from the last traded price at 4pm, which Hong Kong Exchanges said was due to a rebalancing of MSCI Barra indexes.

HSBC Holdings Plc, the second-largest constituent on the benchmark Hang Seng Index, fell more than 10 percent during the closing auction session on Monday, dragging the shares to the lowest close since May 1995, according to Bloomberg News.

Hong Kong's Securities and Futures Commission on Wednesday said it is investigating the last-minute decline in HSBC's shares on that day for possible manipulation. Chow yesterday, however, declined to comment on the progress of the investigation.

Hong Kong Exchanges on March 5 said it planned to implement a 2-percent limit on the rise or decline of stock prices in the auctions from June 22.


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