More investors shun penny stocks; The former executive director of local building solutions company Natural Cool has been fined $150,000 for carrying out purchases to create a false or misleading appearance with respect to the price

More investors shun penny stocks

By Yvonne Chan
POSTED: 31 Oct 2013 22:31
Analysts said investors are shunning this particular market segment after the recent fiasco involving penny stocks.

SINGAPORE: Investor confidence in penny stocks has taken quite a beating. The Singapore Exchange (SGX) junior board, the Catalist Index, has fallen 17.5 per cent since September following the sharp drop in the share prices of some penny stocks. In comparison, the market’s benchmark Straits Times Index (STI) has gained six per cent over the same period. Analysts said investors are shunning this particular market segment after the recent fiasco involving penny stocks. Three penny stocks Asiasons, Blumont and LionGold were suspended by the SGX on October 4 after sharp declines in their stock prices erased S$8.6 billion in market value over three days. They were later allowed to resume trading as “designated securities”. However, when shares of Sky One Holdings plunged as much as 91 per cent on October 28, SGX did not confer the same ruling on Sky One Holdings. Analysts said investors are likely to remain jittery until SGX releases information about its investigation into the previously suspended stocks. “Even though SGX came up with certain explanations, there’s no exact description as to what is called fair orderly transparent trade,” said Ng Kian Teck, analyst at Voyage Research. Daryl Liew, head of Portfolio Management at Reyl Singapore, said SGX faces a delicate balancing act. “On one hand, the SGX has a duty to let the free markets move. On the other hand, there’s an expectation that they need to protect investors as well,” he explained. As for measures to reduce speculation in penny stocks, Mr Ng argued that making it mandatory for small cap companies to increase their free float wouldn’t work. He said: “You cannot ask a company to issue shares for the sake of issuing shares because if the company doesn’t need the money, it defeats the purpose. “It’s an intervention and it would not be as fair, and to the owners, they might not really want to divest in the first place. You’d be forcing them and this would deter people from coming to the exchange.”And as to whether penny stocks would be sullied with a reputation similar to the S-chips saga in the past, Mr Liew thought otherwise. He said: “While there have always been cases of suspicious behaviour or trading pertaining to penny stocks, my sense is that it won’t follow in the footsteps of S-chips. “If you look at the trading habits of investors in penny stocks, they just like the speculative nature. You can’t curb them over the long term.” Analysts said there will still be room for penny stocks among retail investors and speculators.

Singapore company director fined $150,000 by MAS

Thursday, Oct 31, 2013

AsiaOne

SINGAPORE – The former executive director of local building solutions company Natural Cool Holdings has been fined $150,000 by the Monetary Authority of Singapore (MAS) for contravening the Securities and Futures Act (SFA).According to a statement released by MAS, Mr Ang Choon Cheng carried out purchases which were intended to create, and which created, a false or misleading appearance with respect to the price of securities.

His actions also violated a section in the SFA, which prohibits the employment of manipulative and deceptive devices in connection with the subscription, purchase or sale of securities.

Mr Ang, who was then an executive director of Natural Cool Holdings Ltd, had pledged Natural Cool shares to financial institutions for financing purposes.

On 35 days between Jan 9, 2008 and June 16, 2009, Mr Ang bought Natural Cool shares to maintain or raise the price of Natural Cool shares so as to prevent margin calls.

As a result of the purchases, Natural Cool shares closed as much as 12 bids, or 30 per cent, above the preceding traded price.

Through his actions, Mr Ang intended to create, and created a false or misleading appearance with respect to the price of Natural Cool shares, MAS said.

Mr Ang carried out the purchases, as well as two sale transactions in Natural Cool shares, using the securities trading accounts maintained by two other persons with the same brokerage house.

This led the the brokerage house into believing that the purchases and sales were for the benefit of the respective account holders, when he was in fact the beneficial owner of those trades.

Mr Ang was subsequently made to pay a civil penalty of $150,000 to MAS without court action.

Mr Ang has also resigned as a director and Chief Executive Officer of Natural Cool on Oct 31, and has also given a voluntary undertaking to MAS not to be a company director for a period of one year with effect from Oct 31, 2013.

grongloh@sph.com.sg