Retail investors chase penny stocks

The buying interest in penny stocks is driven by growing retail confidence and investors who shift their focus away from blue chips, says a head of research


Retail investors are flocking back to the market, boosting interest in penny stocks, said brokers and analysts.

Penny stocks are quoted securities, trading below the RM1.00 mark. They are seen as studs in a bull market, as retailers clamour for action, at the lowest possible cost.

"I think the buying interest in penny stocks are driven by various factors, but the two main ones would be growing retail confidence and investors who shift their focus away from blue chips," said Jupiter Securities' head of research Pong Teng Siew.

Interest in penny stocks are mainly driven by retail investors' confidence, added participation of day traders, speculators and willingness by brokerages to provide margins.

Pong added that frequent sharp upward swings in prices of many penny stocks are providing the main thrust for retailers at the moment,

OSK Investment Bank head of research Chris Eng said some of the gains made by penny stocks could be explained.

"We have a few companies that were out of the PN17 list, so that have sparked some buying interest," said Eng.

Eng also noticed a trend among traders zeroing on small consumer stocks, mostly companies in the food and retail business.

"You can see buying interest in companies like Farms Best Bhd, Spritzer Bhd, Hwa Tai Bhd and Hup Seng Bhd," he added.

Indeed, for the past six trading days, penny stocks have dominated the most actively traded securities list, with 14 of them being on the top 20.

On the converse, there was only an average of 11.8 stocks on the list in the first two weeks of this month.

"Business has been improving lately," said a remisier from a local stock broking firm, attributing it to the rise in orders made by retail investors.

Retail participation, as a percentage of the total trades done, has been declining, falling to 27 per cent in the first half of the year compared with 37 per cen in the same period a year ago.

Pong sees the rise of retail participation as a positive sign for a sustained market uptrend.

"I believe we can see the market touching a new high soon, probably as soon as next week," he said.

CIMB Investment Bank Bhd said early this week that the benchmark stock index may surpass levels before the start of the global financial meltdown in 2008, to climb to 1,450 by the year-end.

However, some analysts are not biting the bait just yet, pointing to a Bloomberg data this week, which showed that "buy" calls on Malaysian stocks slumped to a decade-low of 39.38 per cent this month.

Read more: Retail investors chase penny stocks http://www.btimes.com.my/Current_News/BTIMES/articles/pennt22a/Article/index_html#ixzz0ucLBAbxl


My comment:
Best time to sell your speculative socks is when retailers are bullish