PENNY stocks crumbled yesterday after Multi Vest Resources (MVest) and Golden Plus Holdings Bhd (GPlus) hit limit down in afternoon trade.
Analysts felt the sudden plunge in the stock prices of MVest and GPlus soured sentiment on other penny stocks, sending the broader market lower. But blue chips rose sufficiently to push the Kuala Lumpur Composite Index (KLCI) up 3 points to 897.
“I believe the reversal in the sentiment surrounding penny stocks was due to the sudden fall of those two stocks,” said a research head.
The ripple effect from the huge drop in the price in those two stocks was almost instantaneous. Analysts said traders were spooked by the fall. Similar falls by other stocks in the past also had a similar effect on penny stocks.
CBS Technology Bhd shed a further 12.5% or 5.5 sen to 38.5 sen, while MWE Holdings fell 11 sen or 13% to 74.5sen. Tanah Emas Corp Bhd dropped 10% or 11 sen to 96 sen.
“The fall was caused by two things, and it was either somebody pulled the rug from under the buying support for those stocks or there was massive forced selling of those stocks,” said an analyst.
Analysts also say that there is little transparency in the factors for the rise in the share price of such stocks, and investors should be wary of stocks that have risen sharply due to speculation.
Some quarters also felt that stockbroking companies were more vigilant these days for possible repercussions that speculative stocks could have on their financial performance, preferring not to be carried away by taking too much risk with counters that perform beyond their fundamental value.
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