Singapore

Penny-stock frenzy rages on despite dip in STI

Local stock market sees unit volume remain high at 3.5 billion units

Penny stock fever continued to rage in the local stock market yesterday even as blue chip activity dipped - the Straits Times Index may have dropped 5.11 points to 3,066.53 in line with the Dow futures surrendering its morning gains, but unit volume remained high at 3.5 billion units.

Dollar value was $1.2 billion, which meant that the average value per unit traded was $0.34 - firmly in penny territory. Excluding warrants, there were 258 rises versus 213 falls, so the broader market was more firm than weak.

Instead of the banks or large caps, such as Keppel or Jardine stocks, the market's recent leader has been interior design and furniture firm Serrano, which earlier this week announced the entry of new investors via a 3.8 billion share placement at $0.002 per share. The counter yesterday rose $0.043, or 148 per cent, to $0.072 on volume of 142 million, bringing its two-day rise to a staggering 3,500 per cent.

Elsewhere in the segment, battered healthcare firm International Healthway Corp saw its shares top the actives list when it shot up by $0.028, or 41.8 per cent, to $0.095 on volume of 401.4 million.

The stock had been suspended for several days, and the firm has made various announcements, including steps to protect its accounting records and new loan facilities.

Also in active play were video specialists Artivision Technologies and oil and gas firm Ezra Holdings.

Meanwhile, commodities company Noble Group, which has occupied top spot in the actives list for most of the past year, was pushed down to 10th place.

Among blue chips, Singapore Airlines' shares closed $0.08 higher at $9.80 on volume of 2.2 million.

DBS Vickers in a report yesterday said it remains neutral on the stock as core earnings remain patchy amid a continued weak demand environment.

"We see weaker yields and higher operating costs eroding most or all the net fuel cost savings in the next few quarters," said the broker.

"Our $10.10 target price is based on 0.9x FY17 P/BV (price/book value), which is about one standard deviation below its historical mean and reflects the sluggish outlook."

In Schroders' latest Talking Point, Mr David Harris, senior investment director for fixed income, said the market is pricing in the risk of higher interest rates in the future due to uncertainty surrounding government spending policies worldwide, many of which have potentially inflationary consequences.

"The economic impact of a Trump presidency will not be known for a long time. The pricing of higher risk assets (for example, equities or bonds with a higher risk of default) will ultimately depend on the evolution of Mr Trump's policies," said Mr Harris.

"In the very near term, a cautious investment strategy remains appropriate. The possibility of either a move away from radical polices towards a more balanced approach, as well as the risk of further antagonistic comments on foreign policy are both large and warrant a cautious and nimble approach to global markets."

Rabobank Financial Markets Research said Greece's financial problems have returned to the market's radar after reports emerged this week that the International Monetary Fund's (IMF) executive board was split when it came to agreeing with the assessment of the Greek economy put forward by the latest IMF Article IV report.

"Going forward, the high-level issue is that the IMF thinks Greece requires debt relief and also that the Greek government should legislate for 'belt tightening' measures now, which may be required in 2018 (remember that IMF is not participating financially in the current bailout)," said Rabobank.

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts