Hong Leong Bank Clarifies Share Margin Financing

Hong Leong Bank Berhad (“Hong Leong Bank”) wishes to clarify its position in respect of share margin financing in the light of recent press coverage on the subject.

Hong Leong Bank has been involved in the share margin financing business for over 15 years. Today, the bank is still actively marketing its share margin financing products to existing customers as well as new customers.

Over the past few weeks, the bank continues to approve many new applications for share margin financing. This reflects Hong Leong Bank’s firm commitment to its share margin financing business. All applications are evaluated based on the credit standing of the customer as well as the value of security offered as per market practice.

In respect of the list of acceptable counters, Hong Leong Bank operates like all other banks and has a list of marginable counters for which it gives value. The list is reviewed from time to time.

During the month of May, some 29 counters were de-margined in line with the bank’s review of counters. The bank has taken steps to pro-actively manage the position with its customers in order to minimize any adverse impact on them and the market generally.

Hong Leong Bank wishes to advise that there have been a number of inaccuracies in some articles published in recent weeks, stating that the bank has increased its list of non-marginable stocks to over 400 counters. This is incorrect. The bank does not have a list of over 400 non-marginable stocks.

On 31st May, the bank circulated a list of 184 counters as designated stocks. The bank did not issue a non-marginable list of over 400 stocks as reported. The 184 designated stocks were given full value for customers’ existing holdings; however, branches must refer further financing to head office for consideration on issues such as concentration, price, liquidity and compliance. For example, Hong Leong Bank and its parent company, Hong Leong Credit Berhad are also on this list of designated stocks for compliance reasons. Regrettably, such internally classified designated stocks have been misconstrued by some to be non-marginable stocks.

Further, Hong Leong Bank would like to point out that some of the stocks reported to be non-marginable by Hong Leong Bank, such as RHB Capital, MISC and Sime Darby, are in fact in our marginable list.

The bank wishes to reiterate its firm commitment to its share margin financing business and will continue to play its role as a responsible bank. Market volatility can be a result of a host of factors, including actions by unscrupulous market manipulators. Hong Leong Bank strongly supports market regulators to curb any such market manipulation.

Press Release - 8/6/2005