Hush hush whisper who dares

MOST of us have played the children’s game of Chinese Whispers. Someone whispers a sentence in the ear of the first person in the queue, and it is passed along the line to the last listener, who often receives a very different message to the original. The stock market is rather like that. It thrives on rumour and speculation.

Now the stock exchange, spurred on by the government, plans to introduce new rules to the game. As part of the effort to make the market as clean as a Swedish dairy, it wants listed companies to promptly confirm or deny any rumours about them that are “reasonably specific and credible”. More than 30 submissions have gone to the ASX, from bodies including the Business Council of Australia. The majority of them hate the idea. But few have mustered the best argument against the proposal. It won’t work. For a start, what is a stock market rumour? Something a bloke told you in a pub? A story put around by a business competitor? Or a hot tip purveyed by a stockbroker? By most measures the rumour has to be published in the media to achieve the status of being deniable. But what media? Could it equally be The Australian Financial Review, the Busselton-Margaret Times, or Master Baker’s Monthly?

It seems a reporter for any of these would be able to call up a company and demand a comment on a story he or she intends to write. If an inaccurate story does get into print the ASX wants to force companies to deny it.

I think the regulators are taking a sledgehammer to crack a nut. Rumours that appear to be well sourced and credible invariably shift the share price of the company in question. The ASX already has the ability to call the chief executive and ask if it knows of any reason for a price movement. If the regulators used that power consistently, rather than sporadically, we would have a more informed market. Chief executives have plenty to do delivering acceptable returns to shareholders without bothering themselves about rumour mills.

It seems the impetus for the proposed rule change was that NAB was too slow to deny a report in The Australian that it was having merger talks with AMP. This seemed more like intelligent speculation wide of the mark. By contrast, most rumours are put about by bored brokers with nothing else to talk about. And the majority come to naught. The exceptions are when a leak has clearly occurred and a share price is racing up in front of a subsequent announcement. That is more the province of insider traders. We have a terrible record of catching and convicting them.

AlintaGas simmering along quite nicely

ALINTAGAS, one of the most widely held stocks among Perth investors, has done its 70,000 shareholders proud since going public two years ago. The share price has climbed over that period from $2.25 to visit a high of $4.35. That was a whisker short of the $4.38 valuation placed on the stock when Kansas-based utility giant Aquila, and its Victorian partner United Energy, bought its 45 per cent cornerstone stake in the company from the WA government.

The shares have since eased to $4.20. It is now assumed that cash strapped Aquila is a willing seller of its interest. The permutations stemming from that are almost endless. AMP has a pre-emptive right to match any offer for the holding, which it would like to clinch as a cornerstone for an energy fund it has on the hob called AP Defender.

The venerable Australian Gas Light group is keen to expand in power generation, having dropped the ball in a couple of recent adventures. United Energy itself has been mentioned, as has Wesfarmers, one of the original underbidders for AlintaGas. Inevitably, Macquarie Bank is hovering in the background with a plan to merge AlintaGas, United Energy and GasNet Australia into one jumbo enterprise. Whatever the outcome, AlintaGas shareholders will be happy to see popular American CEO and Dockers fan Bob Browning staying on.

p See Editorial, Page 8.

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