Singapore Jolted by Collapse of Major Industrial Concern

Singapore reeled under its worst business crisis ever Monday, with all trading in stocks halted here and in neighboring Malaysia following the virtual collapse of a major industrial group.

The crisis, triggered when Pan-Electric Industries Ltd. was put into receivership with debts of $195 million (U.S.), could also hit several stock brokerages, a senior investment analyst told Reuters.

The Assn. of Banks and the Stock Exchange of Singapore held emergency meetings as the affair cast further gloom on the island’s economy, already forecast to shrink by 2% this year.

“The decision was taken to cool off the market and for the public to digest the news” of receivers being appointed at Pan-Electric Industries, Singapore Stock Exchange Chairman Ong Tjin An said.

No details were immediately available, but stockbrokers said the stock exchange was working out a new plan to strengthen the badly shaken local securities industry while banks sought to minimize losses and tighten credit lines.

“No matter what the next episode in the Pan-El crisis brings, Singapore’s reputation as a financial capital will already have suffered as a result of this debacle, the gravest in the republic’s financial history,” the financial daily Business Times said.

The Stock Exchange of Singapore and the Kuala Lumpur Stock Exchange did not indicate when they would allow trading to resume, but stockbrokers expected the suspension to last up to a week.

“Once you close, there is never a good time to open. Share prices are definitely going to slide. A prolonged closure will worsen market sentiment,” a senior bank official said.

But stockbrokers generally welcomed the suspension in both exchanges, which they said prevented panic selling and a possible collapse of the stock market.

The Stock Exchange of Singapore and the Kuala Lumpur Stock Exchange work closely because most of the shares are quoted on both exchanges. “Malaysia will not be spared adverse effects of the Pan-Electric affair,” a Malaysian stock broker said.

Pan-Electric, with holdings in shipping, property and electrical manufacturing, has 68 subsidiaries scattered in Hong Kong, Bermuda, Brunei, Malaysia and Britain.

Others Might Close

Brokers and bankers in both countries said a number of smaller companies, caught in Pan-Electric’s stock swap deals, might be forced to close if banks do not bail them out.

Pan-Electric’s problems included forward purchases of stocks for $64 million (U.S.) by some of its subsidiaries.

The Stock Exchange of Singapore suspended trading in Pan-Electric and two of its related companies on Nov. 19, and the stock index has since fallen by nearly 70 points to 691.81.

The temporary closure does not mean the end of buying and selling. Traders can still come together in the “gray market,” which will be unsupervised.

Concern over Pan-Electric’s problems spilled into Hong Kong, where stock prices fell sharply Monday, with the market index dropping 22 points to 1,694.57.

Stockbrokers said prices were forced lower as Singapore interests sold shares in Hong Kong to raise cash.

“The retreat was widespread as local and foreign (investment) institutions joined the Singaporeans in selling today,” one European broker in Hong Kong said.

A Singapore broker said: “The whole affair has left us numb. Almost every investor just wants to get out of the market.”