Volatile penny stocks demonstrate need for minimum trading price

THE penny stock volatility over the past few weeks was a timely reminder of why the need exists for a minimum trading price on the Singapore Exchange (SGX).

At the very least, a minimum trading price will put a stop to the phenomenon of counters trading close to the minimum tick size of 0.1 Singapore cent and tripling or halving their value in a single session. The bigger benefit will be a mainboard with much less unwanted volatility and risk.

A number of mainboard penny counters have recently encountered elevated volatility. On May 16, of the 20 most heavily traded stocks on the Singapore Exchange by volume, eight were trading in ranges that represented at least 50 per cent of their day-before closing price. Of those, three were mainboard-listed, each of which had tripled its market value by the end of the day. Those outsized numbers need to be digested carefully - almost all of those counters were trading at or below one Singapore cent before that session.