A two-tier market driven by penny stocks

THE phrase "two-tier" has featured prominently in the market and press recently because Keppel Corp's takeover offer for Keppel Land featured two prices. However, the phrase is equally applicable when describing the state of the local market, divided as it is into penny stocks on one hand and blue chips on the other.

What's interesting, however, is that in contrast to almost all of last year when blue chips dominated daily volume and there was no interest at all in pennies, this time it's penny stocks that are leading the way, surpassing their larger capitalised counterparts in the two performance aspects that matter - volume and percentage gains.

According to dealers, the source of the sudden momentum in low-priced issues are proprietary traders who, having been frustrated for many months by the moribund state of the local market and having found their trading stymied by the removal of a cap on clearing fees, are now capitalising on a spillover "feel good" surge in sentiment brought on by massive gains in Hong Kong.