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Spring cleaning or maybe just a weird day?

INEXPLICABLY steep falls in a handful of resource stocks, on thin volumes, spurred on a rumour yesterday that a Hong Kong-based hedge fund was having its portfolio liquidated by its prime broker.

INEXPLICABLY steep falls in a handful of resource stocks, on thin volumes, spurred on a rumour yesterday that a Hong Kong-based hedge fund was having its portfolio liquidated by its prime broker.

The theory was that the fund had been caught short by "holding" too many resource stocks and not enough financials in the wildly swinging market conditions, suggesting it had been hurt playing in short-selling conditions.

Some were saying that the fund may have been linked to investment bank Morgan Stanley, although Insider could get that neither confirmed nor denied by the local office.

One of the factoids being applied to give that theory credence was unusually high turnover in would-be copper and gold miner Indophil Resources, which has had Morgan Stanley entities actively trading its stock for much of this year and were last seen disclosing a holding of around 30 million shares.

Turnover in Indophil yesterday hit more than 60 million shares, although Insider believes there is significant double-counting in that because it appears that one line of 21.4 million shares traded at 33.5? just on 10.30am, was turned around and sold less than six minutes later at 35.5? a share.

That is a $400,000 profit in less time than it takes to drink a cafe latte, and suggests that the first deal was not a stockbroker buying the stock as principal, as is often the case in large lines, because Insider can imagine the enraged call they would receive from their client for having taken such a thick wedge out of the middle.

Then again, it might also mean that the original seller was "distressed", and had to get out of its stake as quickly as possible without finessing the market for a better price.

Insider does hear that the last buyer of Indophil also bought several other large lines, but is a long fund that might be a more stable investor.

While Indophil's price firmed on the day, three other resource stocks of a similar market size suffered painful falls on teeny turnover which does make Insider wonder whether there was someone cleaning out a small portfolio in a hurry (then again, it was Monday and weird things happen without an overnight lead from overseas).

Conquest Mining, Intrepid Mines and Silver Lake Resources all suffered falls in the high teens, percentage-wise, but on negligible volumes. That might get them "speeding" tickets from the ASX, but do not expect the companies to have any meaningful explanations for the events.

What a coincidence

SINGAPORE'S government investment corporation might have publicly spanked investment bank UBS over its rogue trader losses last week, but the bank's chairman Kaspar Villiger said the tiny state had no influence over the departure of chief executive Oswald Gruebel on the weekend.

Still, the fact that Gruebel quit while the UBS board was waving its corporate flag in Singapore to coincide with its sponsorship of the formula one grand prix there is a remarkable coincidence of events.

The emergence of differing interpretations of why Gruebel chose to leave most pointedly a report that it was because he could not get the board to agree to replace Villiger as chairman with Axel Weber sooner, rather than later. Weber, who used to run Germany's central bank, is scheduled to officially become deputy chairman of UBS next March and take over from Villiger in 2013.

Odd trading halt

CONNECTEAST'S decision to opt for a suspension of trading in its stock ahead of this morning's investor vote on selling out to Horizon Roads once again underlines the odd rationales being used for such trading halts.

The toll road operator's statement said that it was a matter of "best practice" and caution to ensure that trading "takes place in an informed market" all pretty much word-for-word the ASX's own listing rules guidelines, so the company can hardly be faulted on those grounds.

Insider finds it hard to understand, though, what was different between Monday and Friday to warrant a suspension unless of course the voting on the takeover scheme had clearly tipped against the ConnectEast board-backed Horizon offer of 55? a unit.

There was one media report on Monday indicating a high voter turnout ahead of the meeting, but no real facts on which way they had jumped.

Given that specialist shareholder proxy soliciting firm, Radar Group, has been on the case, that could be read as an outcome in favour of the takeover.

Proxy voting, online and by mail, closed on Sunday, so the ConnectEast board, and presumably its welcomed suitors from Horizon Roads, all have a very good idea which way the wind is now blowing on the scheme.

ConnectEast chairman Tony Shepherd had been telling investors for days, through ASX announcements and newspapers ads, that the numbers in the poll were close and it was important that investors registered their vote.

In part, that campaign also reflected the need to be able to prove to the court, which will place the final stamp of approval on the scheme, that the company had done all things possible to tell investors what was going on and to give them every opportunity to vote on the outcome.

If ConnectEast is, however, aware that the vote on the bid is lost, the call to halt trading is presumably designed to protect investors from buying or selling the stock without that knowledge.

The answer might be that the toll-road group, instead of stopping trading, could have adopted that other best-practice concept of continuous disclosure and revealed the results of voting that it already has in hand since Sunday.

While it might be concerned that information would sway "swinging voters" likely to attend today's gathering, or give an incomplete picture because proxies can be over-ridden on the day, it could have provided investors with all those caveats, too.

If ConnectEast was concerned that the details of the votes already cast might be around in the market, enabling some to trade with knowledge other investors do not have Insider is pretty sure that insider trading legislation still applies.

insider@fairfaxmedia.com.au

That is a $400,000 profit in less time than it takes to drink a cafe latte.


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