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Small stocks, not so small impact

Thursday, October 9, 2014 - 09:24

The penny stock selloff on Oct 4, 2013 still hurts, but was it really that bad? I went through our archives to look for major market events over the years, then looked at the one-day impact of each event. It turns out that, compared to the likes of Pan-Electric and even China Aviation Oil, last year's little debacle was barely an ant bite: http://btd.sg/1pRaEUf

But maybe we're just using the wrong benchmarks. In doing that historical comparison, I was limited to measuring the Straits Times Index and its predecessor, the Straits Times Industrial Index, because there simply was no data for other benchmarks in the earlier years. But those two are blue chip-dominated indices, when the penny meltdown affected mostly smaller counters. Looking at the FTSE ST Small Cap Index, Oct 4, 2013's 4.1 per cent drop was the largest one-day decline in almost two years, according to data from Shareinvestor.com. And even then, the FTSE ST Small Cap excludes many of the smallest counters.

Prices are also not the only way to measure impact. The graphic shows how far reaching the penny collapse was in other aspects. Rule changes – contra trading! – and market liquidity and police investigations and lawsuits. That long wake is still rocking our boats today. How were you or the people you know affected by Oct 4, 2013?