Posted Dec 26th 2012 9:15AM
Reuters is reporting that large-scale insider trading may be at the heart of some particularly fishy stock-selling behavior, just prior to the original announcement about the Hyundai-Kia fuel economy ratings debacle.
On November 1st, Hyundai-Kia shares traded roughly 2.2 million times (the single highest-volume day of the year), and the stock price fell by about four per cent. For reference, a standard daily trading volume for the stock in 2012 saw about 600k shares trading hands. On November 2nd, the company made public the bad news about the dropping fuel economy ratings for many of its models. In other words: No one outside of the company (and only a smallish group inside the company, we'd imagine) should have known anything about the impending bad news as of the first day of November. After the announcement, the stock price tanked, as you'd expect, and trading volume was way down as well.
Experts seem fully aware that the whole thing reeks of leaked information and subsequent insider trading. If chicanery on this sort of scale seems wacky to you, you'd be inline with the experts who report to Reuters that the level of trading is absolutely suspicious.
The problem is, it seems, that this kind of market reaction is far from uncommon in Asia, especially. Research points out that 26 per cent of price-sensitive announcements in the Asia Pacific region showed some hint of information leakage, just in the first quarter of this year. That figure is roughly double what is expected in North American markets; due in some significant part to much less stringent enforcement of insider trading regulations in Asia, as well as an established culture that doesn't necessarily see the behavior as criminal.