The Straits Times
Published on Dec 05, 2012

What's right for HSBC may not be so for Olam


SENIOR correspondent Goh Eng Yeow's suggestion that Olam International follow HSBC's tactic of offering a deeply discounted rights issue to counter short-sellers is not as simple as it sounds ("Use shock-and-awe strategy to beat short-sellers"; Monday).

HSBC and Olam are different in many ways, insofar as liquidity and the nature of their businesses are concerned. HSBC is in banking, and Olam is in commodities and thus exposed to comparably greater risk.

Moreover, the rights issue must be justified and approved by the relevant authorities.

There is also the claim that short-seller Muddy Waters is acting as a front for hedge fund firms. If this is so, then seeking further cash injections may be a futile strategy.

When billionaire investor George Soros launched an attack on the British pound, there was not much that London could do to prop up the currency. The short-seller made more than a billion dollars after the fiasco.

If Olam is sound, it has nothing to fear from short-sellers.

Robert Ong