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CONTINUED weakness in China and Hong Kong stocks meant the Straits Times Index kicked off the week with a 9.71 points or 0.30 per cent loss to 3,192.79 on Monday. This weakness was also evident in penny stocks where the rally of the past three weeks exhibited clear signs of serious strain - at the peak of penny fever, average value per unit traded was about S$0.40; on Monday, volume of 1.5 billion units worth S$1.14 billion gave an average value of S$0.76.
An advance-decline score of 138-350, excluding warrants, provided further grounds for thinking that penny fever may be declining.
Brokers, however, were not unduly surprised at this, since most of the interest in penny stocks had been generated by dealers and house traders to begin with. Many had also noted that without meaningful retail investor participation, the rally was always likely to be short-lived.
Furthermore, many of the low-priced stocks which popped into life were low-priced for good reason - most were loss-making and therefore lacking in fundamentals.
"The energy which drove pennies these few weeks was purely speculative so for the rally to end as quickly as it started is quite understandable," said a dealer.
As for China, its stock market - already reeling from waves of margin calls and forced selling over the past few weeks - took another hit after news that the final reading for the Caixin China purchasing managers' index (PMI) for July had surprisingly dropped to a two-year low. Caixin's China PMI data tends to focus on smaller and medium-sized companies, filling a niche that is not covered by the official data.