- POSTED: 07 Oct 2013 19:40
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Shares of some small-cap stocks in Singapore were hit by a selloff on Monday despite regulators' efforts to cushion the decline.
SINGAPORE: Shares of some small-cap stocks in Singapore were hit by a selloff on Monday despite regulators' efforts to cushion the decline.
The stocks had soared in recent months, in some cases nearly tripling in value in just two weeks.
Then on Friday, three of the hottest shares plunged between 42 and 61 per cent, wiping out about US$4 billion in market value and sending other small-cap stocks tumbling.
Shares of Blumont Group, Asiasons Capital and LionGold Corp continued their steep decline when trading resumed on Monday after the Singapore Exchange (SGX) lifted the trading suspensions imposed last Friday.
SGX cited concerns that the market might not be "fully informed" for its action.
On Sunday, the exchange barred short-selling and margin trading in the shares, declaring the three stocks as "designated securities".
But when the market opened on Monday, the three stocks tumbled again, falling as much as 92 per cent and pulling down other small-cap shares.
Investment firm Asiasons attributed the pre-suspension price drop, in an exchange filing on Friday, to misguided market rumours that it was under investigation.
The company has since dismissed the rumours as false. Still, its shares plunged 85.6 per cent to close at 15 cents on Monday.
Meanwhile, Blumont shares tumbled 85 per cent to end at 13 cents, after a fall-out of a potential takeover of a coal-mining company.
LionGold resumed trading following an announcement of a possible deal, but fell 71 per cent to finish at 25 cents.
LionGold said it was in an advanced stage of negotiations with Minera IRL on a possible offer for the Latin American gold miner.
Experts said the steep declines in these three counters have dented investor confidence in the small-cap stocks.
Roger Tan, CEO of Voyage Research, said: "I think anybody who wants to go in and warn the market and warn investors about certain counters that they see should also bear this in mind, or else the ripple effect can sometimes go out of control."
Companies related to Asiasons and LionGold were also hit on Monday.
ISR Capital, which has Asiasons among its biggest shareholders, fell by as much as 47 per cent to 12.2 cents. But the stock recovered part of its losses to close at 16.2 cents, down 29.6 per cent.
Meanwhile, telecom services firm Innopac Holdings, where LionGold owns 3.4 per cent, lost as much as 42 per cent to 3.8 cents. It recouped some losses to end 29.2 per cent lower at 4.6 cents.
SGX has also raised queries with several other small-cap firms like Asia-Pacific Strategic Investments, and Ossia International.
Asia-Pacific Strategic Investments fell 35.4 per cent on Monday to close at 18 cents, while Ossia dropped 26.2 per cent to end at 38 cents.
Yet, some analysts said investors should not shun away from penny stocks altogether.
Mr Tan said: "Let's not punish penny stocks because of the volatility in stock prices. I think more importantly, investors should be looking at... what is the business of the penny stock?
"What is the strategy they are putting in place, and also whether the company has talked about the risk strategies, and so on, so forth. I think the fundamentals are more important than just looking at the volatility of the market."
Blue chips held steady, with the Straits Times Index slipping just 1.49 points, or 0.05 per cent, to finish on Monday at 3,136.59.
However on the broader market, losers outnumbered gainers by 401 to 106. Volume totalled 4.07 billion shares valued at S$1.03 billion.