Wilmar share price ambushed by short sellers

What a nail-biting roller coaster ride for Wilmar share price! On the day of its China unit (YKA) IPO, Wilmar share price surged to a high of $4.70 before crashing to $4.36. The volatility of Wilmar share price caught many investors by surprise as YKA debut with roaring success, closing at more than 100% to the IPO price.

Wilmar share price to rocket to $7?

Wilmar share price to hit the roof in 2020?

Wilmar share price in lung bursting form

Looking through the SGX website, it was confirmed that the collapse of Wilmar share price was the work of the short-sellers. On 15 October, short selling activities on Wilmar share price surged to a whopping 10.5 million, nearly 10 times the daily average volume for this counter. So while the Chinese investors popped the champagne over the successful YKA IPO, investors of Wilmar were confounded over the crash of Wilmar share price.

Wilmar share price

In fact, the shorting against Wilmar share price had been timed to perfection as it occurred on a Thursday. Typically, the short sellers would want to close their positions before the weekend in order to avoid any uncertainties. So in the coming days, Wilmar share price should recover some lost grounds. Will the short sellers return next week? Honestly speaking, I don’t know. However, as the third quarter business update is just around the corner, I expect short selling volumes to decrease because the results should be good.

One thing that I learned in investing is that retail investors will never win the big boys because of the inequity in financial resources. Another thing is that we cannot predict the future price movements of the stocks that we invested in. So what this means is that in the short-term, Wilmar share price will experience plenty of volatility. But in the long-term, business fundamentals will prevail. So I am bullish on the long-term prospect of Wilmar share price.

Indeed, there has been plenty of hype among the investment community over the mega YKA IPO but will Wilmar share price turbocharge to the giddy level of $7? To put things into context, the last time that Wilmar share price was trading at $7 was in 2010 – the period of time was crude oil prices were rising. As Wilmar is the leading palm oil trader, the surging crude oil prices pushed Wilmar share price to record highs. Of course, over the decade, things pretty changed much for Wilmar.

Currently, the management is engineering a massive business transformation. By focusing on agribusiness in the huge China market, Wilmar is reinventing the wheel by shedding its image of a leading palm oil trader, which carries plenty of baggage and volatility for the Group. The agribusiness is supposed to bring stability to Wilmar share price and diversified the Group’s sprawling businesses.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. As of 13 October, I am vested 4000 shares in Wilmar. So this article may be biased towards Wilmar share price. In view of the volatility of Wilmar share price, investors must exercise caution in trading this counter.

Wilmar share price bottomed?

As expected, YKA debut in the Shenzhen stock exchange with much fanfare, surging from RMB25.70 to hit RMB56 at closing. This represented more than 100% above the IPO price. Given that YKA has 5.4 billion of issued shares, the market capitalization of YKA is $61 billion (in SGD), and this is double to that of Wilmar’s market capitalization of $30 billion.

Given the above context, the pull-back of Wilmar share price is indeed unjustified as it effectively assigned zero value to YKA’s valuation. The short sellers ambushed Wilmar probably because it is one of the major components of STI. Being an STI constituents comes with the risk of being attacked by short sellers when the overall market conditions turned soured.

Beyond YKA, the appealing factor for Wilmar share price is the [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: October 16, 2020 — 9:23 am

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