Apr 10, 2015

    Penny stocks in play as blue chips take a break

    PENNY stocks led the market again yesterday while blue chips took a rest, in a day focused on heavy play in several counters.

    Blue chip stocks were broadly mixed as the market paused from the 12-month high hit by the Straits Times Index (STI) on Tuesday.

    The STI closed 0.38 point lower at 3,460.30, with Singapore once again decoupling from rallies in Hong Kong and Tokyo. The index hit 3,465.62 on Tuesday.

    Penny stocks that have seen demand surge for several weeks pushed volumes yesterday to 3.04 billion shares traded worth $1.36 billion. This was higher than the daily average trading volume of $1.1 billion last year.

    The FTSE Catalist index closed 1.4 per cent, or 10.16 points, higher at 734.15.

    Water treatment firm SIIC Environment, a mainboard stock, was much sought-after again, drawing a trading warning from the Singapore Exchange (SGX).

    The counter surged 5.8 per cent, up 1.1 cents to 20 cents, with 188 million shares traded. It rose 10.5 per cent on Wednesday.

    The SGX issued a "trade with caution" warning on the counter.

    SIIC said later that it is planning a five-in-one share consolidation that will theoretically make each share worth 86 cents.

    This is to meet the SGX ruling that all stocks must have a minimum trading price of 20 cents from March 2 next year.

    Another counter in the limelight was commodities trader Noble Group. It fell 5.5 per cent to 86 cents after a report by short-seller Muddy Waters.

    The stock fell as much as 9 per cent, after Muddy Waters questioned Noble's cash flow and management, and said it had taken a short position in Asia's largest commodity trader by revenue.

    Nearly two months ago, Noble's counter went through the same pain after anonymous group Iceberg Research questioned its financials.

    Meanwhile, shares of Singapore's biggest telco Singtel fell 1 cent to $4.37 in a follow-up to a four-cent drop the previous session. The counter has had a recent strong run.

    Singtel said it bought United States cyber-security firm Trustwave for US$810 million (S$1.1 billion) in a bid to become a global cyber-security player.

    Nomura noted that while the deal is consistent with Singtel's strategy to diversify its revenue stream away from traditional telephony, "these businesses will be a drag on earnings in the near term, and it is still largely unproven...if incumbent telcos can successfully capture new and growing revenue stream".

    "We maintain our buy rating on Singtel, but there could be some profit-taking especially after recent strong run," Nomura said.