Scrapping penny stocks not the solution

WHILE equity markets around the world have been climbing steadily, led by Wall Street, amid signs of a recovery in economic conditions in key economies, the Singapore bourse has gone into something of a hibernation. Yes, the benchmark Straits Times Index has held steady but overall volumes have plunged, reflecting a major loss of trading interest over the past two months.

And this is largely due to the collapse in the erstwhile most vibrant segment of the market: sub-dollar counters. Much of this has had to do with the fortunes of several highly active stocks such as Blumont, Asiasons and LionGold, which had run up too high and too fast, and far ahead of their fundamental valuations.

A sudden selldown and subsequent sanctions imposed by the Singapore Exchange effectively spooked the market and sent players scurrying for cover, not just from these counters but most other actively traded penny stocks as well. The net effect has been to turn this segment of the market into a virtual ghost town.