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cautious penny stock
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investment
Senior |
21-Jul-2007 19:26
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2IT'S getting to be a familiar sight these days - stocks plunge either early or in the middle of the week before recovering on Friday. Then again, it's probably simply a reflection of the prevailing attitudes towards risk in all markets these days - every plunge is very quickly followed by a bounce of equal magnitude. For the second consecutive week, this was the case - supposedly negative property market news combining with slides everywhere else in the region to first send the Straits Times Index into a tailspin on Wednesday before Wall Street came to the rescue by rising to record highs despite not-so-encouraging statements by US Federal Reserve chairman Ben Bernanke. The second line, in the meantime, has evolved into - and there's no other way to say this - a dangerously speculative bubble with stocks up by huge amounts in a short space of time, thanks no doubt to rampant syndicate manipulation, probably with the aid of insiders or major shareholders. Volatility in this part of the market also shot up considerably this week, with the UOB-Sesdaq Index dropping 8 per cent on Wednesday while the Construction Index lost 9 per cent. The other notable feature was the record volume done in penny stocks. Wednesday's jaw-dropping all-time high of 9.1 billion units was about 50 per cent more than the previous record and would be hard to surpass. While some observers may marvel at the heights to which the market has risen (or depths to which it has sunk, depending on your point of view), others were clearly worried. That this was the case was obvious from the fact that several brokers installed trading curbs on some of the more speculative counters, a move which capped rises in these stocks when the market rebounded on Thursday and Friday. To be honest, no one really expected Wednesday's sudden sell-off, though the thought that things were getting out of hand was probably lurking at the back of everyone's minds. As it turned out, the government's announcement of the hike in development charges coincided with alarming weakness in Japan and Hong Kong, so with plenty of reasons to sell, investors sold. That Wednesday night, Mr Bernanke delivered a quite frankly downbeat assessment of how things stand for the US economy and its outlook - inflation is still a niggling problem, the housing market will get worse before it gets better, and growth is slowing because of the drag from the real estate market. As it has for many months now, the stock market chose to view this assessment as being within expectations and even chose to ignore Thursday's report of a decline in a leading economic indicator to push the Dow Jones Industrial Average above 14,000. This led to yesterday's 46.76-point rise in the ST Index to 3,651.38, which meant that for the week the index only lost 3 points. Among the standout features in the second line here was the crash and rebound in China railway manufacturer Midas Holdings, following a news report in China that its chairman was under an official probe. This led to a 22-per-cent loss in Midas' stock price. Following a strenuous denial by the company, the stock managed to regain some traction, rising 17 cents to $1.60 yesterday |
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