Shares in logistics firm Sky One and engineering company Tritech Group crashed spectacularly on Monday, triggering fears that they might be classified as "designated securities" by the Singapore Exchange (SGX) and creating spillover selling pressure on the rest of the penny segment.
A dealer, referring to the collapse in Sky One in the morning, said: "The sky is falling on penny stocks.
"There was worry that, with such a steep loss, SGX will step in and designate the stock as it did with three others recently."
Earlier this month, when the prices of Asiasons Capital, Blumont and LionGold suddenly went into freefall, the exchange halted trading and categorised the trio as designated securities, which meant cash had to be paid upfront for all purchases.
The exchange said this was to ensure fair and orderly trading. Last Friday, SGX said designation is imposed when it believes there is manipulation or excessive speculation.
At the low, Sky One's shares lost an astounding 43 cents or 91 per cent at four cents, prompting a query from SGX.
Before it filed its reply, Tritech shares started to crater, losing as much as 25 cents or 52 per cent at 23.5 cents, also drawing an SGX query.
After lunch, both companies replied, essentially saying they could not explain the unusual trading in their shares.
When trading resumed, Sky One rebounded to 9.2 cents, still 37.8 cents or 80 per cent down for the day. Tritech also managed to recover some lost ground, ending a nett 12 cents or 25 per cent down for the day at 36.5 cents.
Volume traded in Sky One was 390 million; for Tritech, it was 10 million.
Brokers said the selling suggests the possibility of margin calls and forced selling. Whatever the case, the entire penny segment also caved in: of the top 20 most actively traded stocks, 16 ended weaker, with all 16 of them priced below 30 cents.
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