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12-03-2013, 07:59 AM
If you are prepared to speculate, then also be prepared to lose substantial sums of money!
The Straits Times
www.straitstimes.com
Published on Mar 12, 2013
Penny stocks plummet after record highs
Myanmar plays worst hit amid weak market and fresh trading curbs
By Anita Gabriel Senior Correspondent
THE rally in penny stocks that has taken many to record highs this year came to a crashing halt yesterday with a trader referring to the selldown as a "burst bubble".
Many shares that have shot up despite the firms not having impressive fundamentals were dumped amid a relatively weak market and fresh trading curbs that were imposed by some brokerages.
One stock, WE Holdings, lost 47 per cent. Others were down by as much as 20 per cent while the FTSE ST Catalist Index, which tracks 109 counters, mostly penny stocks, lost 5 per cent.
The FTSE Fledgling Index, which reflects the value of the bottom 2 per cent of stocks by market capitalisation, fell nearly 2 per cent. Both these indices have risen about 14 per cent this year, far outpacing the benchmark Straits Times Index's 4 per cent rise.
Retail investors who chased these stocks on the herd mentality are probably the biggest losers.
"Retail investors lost quite a bit of money today. The lesson is that it is never in their interest to chase a stock that is trading way above its book value," said remisier Alvin Yong.
Yesterday's decline only underscored a trend that has been in motion over recent weeks.
"It's not really unusual as most of the recently active penny stocks have started to slow down after a considerable run," said another remisier.
Realisation may have also set in that some of these shares were at levels well above their true value.
"The bubble has burst. Some of these counters were trading way ahead of their fundamentals with lofty expectations. There is a sense of reality that has hit investors that the shares have run ahead of the developments," said Mr Yong.
Myanmar plays topped the hit list yesterday. The steepest decline was felt by Catalist-listed WE Holdings, which was chased up recently on news of a potential tie-up and business venture in the new land of opportunities.
The counter reached a high of 18.4 cents on Feb 26. But it plunged six cents or 47 per cent to 6.8 cents yesterday, on trade of 410 million shares worth $39 million, the day's most active stock.
Another Myanmar play, Aussino Group, lost 2.2 cents or 12 per cent to 16.7 cents. Last year, the lifestyle product supplier was a subject of a reverse takeover led by a prominent Myanmar businessman to mark its shift into the country's budding energy sector. That helped the counter hit a high of 29 cents on Jan 31.
The corporate development is still in limbo and faces regulatory risk. The maker of bedlinen and towels has been suffering losses since 2008 and was placed on the Singapore Exchange watch-list in 2011. "There have been no updates on the deal and the company has yet to turn around. But it's already trading like a profitable firm," a dealer pointed out.
Ntegrator International shed two cents or 19 per cent to 8.4 cents. The communications network firm said in January that it secured $12 million in new contracts.
Investor favourite Yoma Strategic also came under selling pressure, falling 7.5 cents or 9 per cent to 75.5 cents.
"When these micro stocks fall, they fall very fast. Retail investors are not that nimble to get out and fear grips them. So, some of these counters will have few buyers which precipitates the fall," said remisier Ernest Lim.
The sharp fall in some of these counters could have also been a result of trading curbs from stockbroking houses that require more cash upfront so they can limit their exposure to a single counter. Broker UOB Kay Hian has imposed restricted online trading on 15 stocks, including WE Holdings, according to its website.
anitag@sph.com.sg
The Straits Times
www.straitstimes.com
Published on Mar 12, 2013
Penny stocks plummet after record highs
Myanmar plays worst hit amid weak market and fresh trading curbs
By Anita Gabriel Senior Correspondent
THE rally in penny stocks that has taken many to record highs this year came to a crashing halt yesterday with a trader referring to the selldown as a "burst bubble".
Many shares that have shot up despite the firms not having impressive fundamentals were dumped amid a relatively weak market and fresh trading curbs that were imposed by some brokerages.
One stock, WE Holdings, lost 47 per cent. Others were down by as much as 20 per cent while the FTSE ST Catalist Index, which tracks 109 counters, mostly penny stocks, lost 5 per cent.
The FTSE Fledgling Index, which reflects the value of the bottom 2 per cent of stocks by market capitalisation, fell nearly 2 per cent. Both these indices have risen about 14 per cent this year, far outpacing the benchmark Straits Times Index's 4 per cent rise.
Retail investors who chased these stocks on the herd mentality are probably the biggest losers.
"Retail investors lost quite a bit of money today. The lesson is that it is never in their interest to chase a stock that is trading way above its book value," said remisier Alvin Yong.
Yesterday's decline only underscored a trend that has been in motion over recent weeks.
"It's not really unusual as most of the recently active penny stocks have started to slow down after a considerable run," said another remisier.
Realisation may have also set in that some of these shares were at levels well above their true value.
"The bubble has burst. Some of these counters were trading way ahead of their fundamentals with lofty expectations. There is a sense of reality that has hit investors that the shares have run ahead of the developments," said Mr Yong.
Myanmar plays topped the hit list yesterday. The steepest decline was felt by Catalist-listed WE Holdings, which was chased up recently on news of a potential tie-up and business venture in the new land of opportunities.
The counter reached a high of 18.4 cents on Feb 26. But it plunged six cents or 47 per cent to 6.8 cents yesterday, on trade of 410 million shares worth $39 million, the day's most active stock.
Another Myanmar play, Aussino Group, lost 2.2 cents or 12 per cent to 16.7 cents. Last year, the lifestyle product supplier was a subject of a reverse takeover led by a prominent Myanmar businessman to mark its shift into the country's budding energy sector. That helped the counter hit a high of 29 cents on Jan 31.
The corporate development is still in limbo and faces regulatory risk. The maker of bedlinen and towels has been suffering losses since 2008 and was placed on the Singapore Exchange watch-list in 2011. "There have been no updates on the deal and the company has yet to turn around. But it's already trading like a profitable firm," a dealer pointed out.
Ntegrator International shed two cents or 19 per cent to 8.4 cents. The communications network firm said in January that it secured $12 million in new contracts.
Investor favourite Yoma Strategic also came under selling pressure, falling 7.5 cents or 9 per cent to 75.5 cents.
"When these micro stocks fall, they fall very fast. Retail investors are not that nimble to get out and fear grips them. So, some of these counters will have few buyers which precipitates the fall," said remisier Ernest Lim.
The sharp fall in some of these counters could have also been a result of trading curbs from stockbroking houses that require more cash upfront so they can limit their exposure to a single counter. Broker UOB Kay Hian has imposed restricted online trading on 15 stocks, including WE Holdings, according to its website.
anitag@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
