Short position

The Tanjung Piai Integrated Petroleum and Maritime Industrial Park.

Why the sudden selldown?

THE sudden selldown of four stocks this week has been puzzling. United U-Li Corp Bhd, Sam Engineering & Equipment (M) Bhd, SLP Resources Bhd and SCGM Bhd saw their prices collapse this week for reasons yet unknown. As a result of the three-day selldown, a whopping RM560mil in market capitalisation from these counters has been wiped out. Two of them – U-Li and SLP – received unusual market activity queries from Bursa Malaysia to which both replied that they weren’t aware of any development that could have cause the plunge in their share prices. While the selldown is still a mystery, one fact that could have led to their drastic dips is that these counters lack liquidity in the trading of their shares. These stocks typically have had thin trading volumes. During this selldown period, the total trading volume of three of the four stocks ranged from 1.9 million to 2.6 million shares, which is not at all a large number of shares. U-Li’s volume hit a higher figure of 5.7 million shares. Still by no means is this a high figure. This indicates that the illiquidity of these shares exacerbated the share price decline. Still, it doesn’t explain who is selling and why? In SAM’s case, the reason could be attributed to its declining earnings. SAM on Wednesday reported first-quarter results which saw its net profit fall to RM9.84mil from RM13.25mil for the same period a year earlier. Revenue was also lower at RM127.18mil against RM134.46mil earlier.