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Members of the business community were stunned by news that Mr Wee Sing Guan, a 'quiet' man, was behind the currency losses disclosed by SembMarine late on Monday.
The revelations yesterday sent SembMarine shares reeling as analysts fell over themselves to downgrade the stock. About $1.8 billion of market capitalisation disappeared as the shares lost 86 cents or 15.4 per cent to close at $4.74.
About 100 million shares were traded, 12 times the daily average of 8.3 million shares. Parent Semb-Corp Industries' shares lost 30 cents to close at $6.
Nervous investors are worried that the US$248 million figure disclosed by SembMarine may not be the end of the story as some of the currency positions taken by Mr Wee remain open.
The company said it does not speculate in currency transactions, but it does hedge against currency losses.
It does this to try to balance out the risks from currency movements resulting from sales and purchases in currencies such as United States dollars, euros and Japanese yen.
This could be customers paying in US dollars or buying equipment in US dollars, or European customers paying in euros.
Bankers say it would be very difficult to run up losses of this scale simply through standard hedging practices.
They say the simplest form of hedging involves buying a forward contract to sell a sum of US dollars, which the company knows it will receive, at a locked-in exchange rate.
With the US dollar down only 7 per cent from a year ago, bankers say a loss on this scale is much more likely through currency speculation involving complex financial instruments and billions of dollars.
Four SembMarine directors, including chairman of the audit committee Tan Tew Han, who are now part of a special committee set up to look into the affair, were huddled in meetings yesterday.
Mr Wee Sing Guan, 58, married with two children, joined the company in 1974 as an accountant, just two years after he graduated from Nanyang University with a Bachelor in Commerce.
As a key senior executive, he was likely among those shown in the annual report as drawing a pay package of between $500,000 and $750,000.
Mr Wee has now been relieved of all his duties and directorships within the various group companies. But it is believed he is still employed, while he assists law firm Drew & Napier and auditors Ernst & Young which are looking into the legal aspects.
It is understood that no report has been made to the white-collar crime buster Commercial Affairs Department.
The losses were discovered as the third-quarter results were being prepared. They are due to be released next Thursday.
This is the first large-scale corporate scandal to hit the local scene since the likes of China Aviation Oil, electronic waste recycler Citiraya Industries and mobile phone service provider Accord Customer Care Solutions in 2005.
Ironically, SembMarine recently won an award for transparency from the Securities Investors Association of Singapore.
COSTLY LESSON FOR INVESTORS AS SEMBMARINE STOCK PLUNGES, MONEY
