KUALA LUMPUR: The average price of a stock traded on the local bourse has fallen by 30% in the past month as retail investors have veered towards penny stocks over blue chips, driven by the prospect of a quick gain.
“Some of these investors are not there for the long term and they don’t look at the dividends or returns these stocks are distributing, which may be measly. They’re in for the buy and sell,” said a market observer.
Data from Bursa Malaysia indicated that the average price of a share traded on the market has fallen to 83 sen in the first week of November from RM1.17 in the previous month and RM1.70 in the middle of the year.
Penny stocks that have been in the spotlight are DPS Resources Bhd, Tricubes Bhd and Harvest Court Industries Bhd, whose prices have shown some volatility in a limited period of time.
Securities Commission (SC) chairman Tan Sri Zarinah Anwar last week cautioned investors against penny stocks whose prices have soared despite the lack of any substantial developments.
“I would like to remind investors that they have to exercise caution and make informed investment decisions. Everybody has a role to play in terms of ensuring fair and orderly trading in the market,” she said.
Bursa Malaysia had suspended trading in the shares and warrants of Harvest Court, which were declared as designated securities.
“The decision to designate the securities of Harvest Court and its warrants is due to excessive speculation observed in their trading and has been taken in the interest of ensuring a fair and orderly market,” said the local bourse.
One market observer indicated that the trend of investors preferring penny stocks may stabilise over the long term as attention returns to the fundamentals of each stock.
“For many investors, the earnings generated by a company and the dividend rate for its shareholders remain important. Moreover, some of these penny stocks may be illiquid despite their small unit size and their market capitalisation may limit certain growth opportunities,” he said.
DPS closed two sen or 7.7% lower at 24 sen with 44.26 million shares yesterday, after reaching more than a three-year closing high of 31 sen on Monday.
The stock reached an intraday high of 40.5 sen on Tuesday. Investors who bought at that level would have lost 40%.
Harvest Court hit limit down for the second consecutive day after trading resumed following its designated status.
The stock lost 45 sen or 30.2% to close at RM1.04 on a volume of 3.37 million shares.
While the stock is still up substantially from under 10 sen about a month ago, it has also halved from its recent peak of RM2.14 on Nov 14.
Tricubes closed 2.5 sen or 9.6% lower at 23.5 sen with 18.09 million shares traded. The stock surged 9.5 sen or 57.8% from 16.5 sen to 26 sen on Wednesday after announcing that it had secured a contract from Polis DiRaja Malaysia to handle the payment of and enquiries about traffic summonses.
This article appeared in The Edge Financial Daily, November 18, 2011.
“Some of these investors are not there for the long term and they don’t look at the dividends or returns these stocks are distributing, which may be measly. They’re in for the buy and sell,” said a market observer.
Data from Bursa Malaysia indicated that the average price of a share traded on the market has fallen to 83 sen in the first week of November from RM1.17 in the previous month and RM1.70 in the middle of the year.
Penny stocks that have been in the spotlight are DPS Resources Bhd, Tricubes Bhd and Harvest Court Industries Bhd, whose prices have shown some volatility in a limited period of time.
Securities Commission (SC) chairman Tan Sri Zarinah Anwar last week cautioned investors against penny stocks whose prices have soared despite the lack of any substantial developments.
“I would like to remind investors that they have to exercise caution and make informed investment decisions. Everybody has a role to play in terms of ensuring fair and orderly trading in the market,” she said.
Bursa Malaysia had suspended trading in the shares and warrants of Harvest Court, which were declared as designated securities.
“The decision to designate the securities of Harvest Court and its warrants is due to excessive speculation observed in their trading and has been taken in the interest of ensuring a fair and orderly market,” said the local bourse.
One market observer indicated that the trend of investors preferring penny stocks may stabilise over the long term as attention returns to the fundamentals of each stock.
“For many investors, the earnings generated by a company and the dividend rate for its shareholders remain important. Moreover, some of these penny stocks may be illiquid despite their small unit size and their market capitalisation may limit certain growth opportunities,” he said.
DPS closed two sen or 7.7% lower at 24 sen with 44.26 million shares yesterday, after reaching more than a three-year closing high of 31 sen on Monday.
The stock reached an intraday high of 40.5 sen on Tuesday. Investors who bought at that level would have lost 40%.
Harvest Court hit limit down for the second consecutive day after trading resumed following its designated status.
The stock lost 45 sen or 30.2% to close at RM1.04 on a volume of 3.37 million shares.
While the stock is still up substantially from under 10 sen about a month ago, it has also halved from its recent peak of RM2.14 on Nov 14.
Tricubes closed 2.5 sen or 9.6% lower at 23.5 sen with 18.09 million shares traded. The stock surged 9.5 sen or 57.8% from 16.5 sen to 26 sen on Wednesday after announcing that it had secured a contract from Polis DiRaja Malaysia to handle the payment of and enquiries about traffic summonses.
This article appeared in The Edge Financial Daily, November 18, 2011.
