Investors spooked by penny stock saga

PHOTO: Investors spooked by penny stock saga

The witches' brew of wild price swings, tough trading curbs by brokers and regulatory attention is making the penny stock sector a treacherous market for many investors.

The latest jolt came on Tuesday from market talk that several stockbroking companies have imposed new restrictions on a growing list of shares.

The moves could herald another round of the penny stock sell- down, some market watchers fear, similar to the one earlier this month where billions of dollars were wiped off the market value of Asiasons Capital, LionGold and Blumont.

The Straits Times understands that AmFraser Securities curbed trading on 11 counters on Tuesday, a step that requires traders to stump up cash upfront for purchases or only allows clients with cash in their accounts to buy these shares.

The restricted counters include the trio - Asiasons Capital, LionGold and Blumont - that were previously classified as designated securities by the Singapore Exchange (SGX) following wild gyrations in their share prices .

The others include Sky One, Tritech, Mirach Energy, Innopac Holdings, ISDN Holdings, Swee Hong and Hankore Environment Tech. LionGold warrants are also included in the list.

Already, the Monetary Authority of Singapore and SGX are embarking on an "extensive review" of the activities involving the spectacular rise and fall of these three counters this year.

AmFraser is one of several brokers rumoured to have exposure to losses involving the three battered stocks.

When contacted, AmFraser Securities executive director Lee Wing How said: "I do not wish to comment. There's nothing to comment."

Some of the counters which are the subject of the latest curbs by the broking houses have experienced sharp falls recently. They include Sky One, Tritech Group and OKH Global, whose shares fell between 8 per cent and 16 per cent on Tuesday, extending their losses from the previous day.

The nosedive of some 80 per cent in the shares in Sky One, a logistics firm, on Monday took most by surprise.

After rising to a high of 48 cents on Oct 14 and hovering at around 47 cents a week ago, the stock plummeted to a low of 8.5 cents on Tuesday.

The sharp fall on Monday drew a query from SGX.

"We have not seen such hard- to-fathom volatility as wide spread and lasting this long in this market for as long as I can remember," said a market observer.

OKH Global is the latest to join the penny stock saga. The industrial property developer debuted on the mainboard only five months ago following a reverse takeover.

On Tuesday, its shares plunged sharply in early morning trade by 16.5 cents or 23 per cent to 55 cents.

The fall drew a query from the SGX and trading was later halted - its last traded price was 61.5 cents, 14 per cent down from the previous day - pending an announcement.

OKH Global's share placement exercise in May at 24 cents each had drawn prominent investors, namely former UOB Kay Hian stockbroker Han Seng Juan, and managing director of mainboard- listed Tai Sin Electric Bobby Lim Chye Huat.

The firm announced later on Tuesday evening that it has completed an agreement to set up a 40:60 joint-venture company with Pan Asia Logistics Singapore.

UOB Kay Hian swiftly moved in on Tuesday to add both Sky One and OKH to its growing list of restricted counters. The number of such counters had risen to 56 as of Tuesday from merely 18 earlier in the month.

That effectively bars online trading on these counters and requires clients buying into shares of these firms to make upfront payments if their purchases exceed $30,000.

The move by Singapore's largest retail broking firms is now being viewed as a harbinger of more volatility ahead.

It was only earlier this month that the beleaguered Liongold and Blumont attributed the sharp falls in their share prices to the trading curbs imposed by UOB Kay Hian.

Traders' worries are further fuelled by expectations that the SGX may move again in such a dramatic and unprecedented fashion to slap trading curbs on some of these other counters that have seen much volatility.

"All these restrictions and the massive (share price) fall in the trio are really getting investors spooked... No one wants to be caught in the same mess again," said a remisier.

anitag@sph.com.sg


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