KUALA LUMPUR: Trading in Malaysia’s speculative penny stocks is expected to be energised by the current high turnover in super-penny stocks on the Singapore Exchange (SGX), local senior dealers said.
The Singapore factor, plus optimism fuelled by positive news from the US fiscal cliff talks, European macro-economic crisis, as well as encouraging economic data from the US and China, are expected to lure greater trading interest in local penny stocks this month, they added.
“We are watching Singapore. Last Friday, its volume suddenly jumped to seven billion shares. We have alerted our own remisiers to prepare for the contagion effect,” said Sam Ng, president of the Remisiers Association of Malaysia.
In December 2012, the average daily trading volume on the SGX was about 2.4 billion shares, its web data shows.
“The super bull in Singapore in super-penny stocks will have an impact on us. And a Chinese New Year (CNY) rally will definitely follow suit,” added Ng, also senior dealer at Interpacific Securities Sdn Bhd.
Goh Kay Chong, a senior dealer at SJ Securities Sdn Bhd, said the currenthigher trading volume is also due to the January effect, apart from the Singapore factor.
“This traditional feel-good factor in January is also luring retail players back to the market. With bonus payments received at around this time of the year, people feel rich and they are finding avenues to invest their money,” he said.
Last Friday, SGX saw its trading volume surge to a feverish pitch, hitting a recent high of 7.05 billion shares valued at S$1.36 billion (RM3.36 billion). The top 10 actives were dominated by penny stocks accounting for 3.58 billion units.
mDR Ltd, which distributes telecommunications devices and provides mobile related services, netted 1.03 billion shares when it closed at 1.8 Singapore cent last Friday.
This was followed by Elektromotive Group Ltd, which closed 0.1 cent higher at 0.4 cent on trades of 518.81 million shares; while ICP Ltd ended flat at 0.4 cent on 433.11 million shares.
SGX’s strong trading volume, led by penny stocks, persisted this week. On Monday, trades at SGX totalled over 6.5 billion shares while on Tuesday it was over 5.7 billion. Yesterday, 4.4 billion shares were traded.
Indeed, the contagion effect on Malaysia was already felt last Friday in the local market. Total trades rose to 1.25 billion shares, from 1.12 billion last Thursday. This volume of over one billion has continued into this week so far. Yesterday, the volume totalled 1.1 billion.
Ng noted there was higher retail interest in the local stock market last Friday, taking after Singapore.
According to Albert Fong, president of Society of Remisiers in Singapore, retail investment and contra play, as well as Internet trading have been responsible for the high trades in penny stocks in the republic.
“The fear factor that dominated the whole of last year has dissipated. The removal of three main concerns over US fiscal cliff, European crisis and China economy has cleared the way for more optimism,” the senior remisier in Singapore told The Edge Financial Daily.
But in addition to retail play, another Singapore remisier attributed the high trading volume to modern computer trading called algorithm trading, which allows institutional funds or brokerages to plug their super computers into the exchange system.
The current high trading volume may have prompted the SGX to come out with a new reporting system on short-selling.
On Jan 8, the exchange said it will report daily short sales volumes for every counter beginning March as it “pursues its mission to be a leader in risk management and transparency”.
This requires traders to tag as a short sale any sale in which the seller does not own the shares.
“The tagging of short sell orders and disclosure of short-selling information will enable investors to make better-informed investment decisions,” SGX said on its website.
This article first appeared in The Edge Financial Daily, on Jan 10, 2013.