Penny stock rush pushes Bursa volume to new record high

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KUALA LUMPUR (July 9):  The local share market marked a new milestone yesterday as trading volume surged to a fresh record high of 11.81 billion shares, driven mostly by a rush for penny stocks. This resulted in a total trading turnover of RM4.36 billion across the local bourse.

Notably, this new record came just less than two months after the previous record high of 11.21 billion shares that was registered on May 18.

The brisk trading seen among penny stocks, which are often prone to speculation, resulted in the top 20 most active counters across Bursa Malaysia yesterday being of the penny variety. And 17 of them were trading at less than 30 sen apiece.

A dozen of these counters are ACE-listed ones, which contributed a total trading volume of 2.92 billion, or almost a quarter of yesterday’s overall trading volume.

Interestingly, one counter alone, namely PDZ Holdings Bhd, saw 1.33 billion shares traded, which is about 11% of the bourse’s total volume. Its warrants, PDZ-WB, also saw some 492.71 million units done. Altogether, the mother stock and its warrants made up 15.4% of the day’s total.

Market experts think the surge in trading interest is due to the current low interest rate environment, which rendered conventional fixed deposit yields unsatisfactory. Hence, more and more investors have been seen shifting their funds to the equities market in search of better returns, said Inter-Pacific Securities Sdn Bhd head of research Victor Wan.  

“And given the current lack of alternative investments compared to equities, news-driven and speculative elements could easily drive share prices up,” Rakuten Trade Sdn Bhd research vice president Vincent Lau said.

And some investors have adopted a high-risk for high-return attitude, Lau said, buoyed by the market rally seen since the March rout.

Philip Capital Sdn Bhd chief investment officer Ang Kok Heng also pointed to the high confidence level among investors as a possible key to yesterday’s penny stock rush.

“I could say that the timing has been good for investors that managed to ride on the rally that started from March’s low point. Most stocks have been on a remarkable uptrend, and investors are feeling good, believing luck is on their side. This gain in confidence has prompted some to try their hands at penny stocks,” Ang said.

Malacca Securities Sdn Bhd head of research Loui Low concurred. “I think market participants have earned quite a bit of money from glove and tech stocks. So, without any fresh leads from the market now, they believe the next best option is penny stocks,” Low said.

Investors are also adopting contra plays, as they focus on fast turnarounds. This will likely see the brisk trading seen among low-liner stocks be sustained for a while, according to market observers.

The FBM ACE and FBM Small Cap indices have both far outperformed the FBM KLCI since March.

The ACE index has jumped 122.79% to 7,128.64 points, while the Small Cap index has gained 64.02% to 12,611.81. In contrast, the KLCI, with its basket of blue chips, have advanced 29.82% to 1,583.5.