Highlight Selldown on small-cap stocks

by **Cals** Tue 29 Apr 2014, 22:06

Highlight Selldown on small-cap stocks

Business & Markets 2014

Written by Charlotte Chong of theedgemalaysia.com

Tuesday, 29 April 2014 08:54

KUALA LUMPUR: Three small-cap counters — Industronics Bhd, VisDynamics Holdings Bhd and MNC Wireless Bhd — fell victim to a strong selldown yesterday, sparking concern whether the small-cap party is soon to be over.

MNC Wireless topped the loser list, plummeting 60.5%, or 23 sen, to 15 sen yesterday from 38 sen last Friday, with 20.58 million shares changing hands. VisDynamics plunged 39%, or 30 sen, to 47 sen from 77 sen last Friday.

Industronics dropped 43.8% to 38.5 sen, while Solution Engineering Holdings Bhd slid 52.7% to 13 sen.

The heavy selling in Solution Engineering was partly due to the sale of 5.5 million shares, or a 2.96% stake, by Industronics at 12.63 sen per share on the open market. Some 47.9 million Solution Engineering shares were traded yesterday.

Apart from VisDynamics, MNC Wireless was slapped with an unusual market activity (UMA) query by Bursa Malaysia after its share price hit limit down yesterday.

The share prices of small-cap stocks have jumped in recent months to multi-year peaks, if not record highs. Before the selldown, MNC Wireless soared 46.15% in just two months to 38 sen on April 25 from 26 sen on Feb 20, while Solution Engineering climbed 40% within a month to 35 sen on April 22 from 25 sen on March 7.

VisDynamics jumped 24.2% to 77 sen on April 25 from 62 sen on Dec 31 last year. On the other hand, Industronics rose 9.6% to 68.5 sen last Friday from 62.5 sen on Feb 4.

Dealers said should the selling continue, it would prompt margin calls on stocks that had lost ground, and that would result in more downward pressure caused by forced selling.

Already some stockbroking houses have designated a list of small-cap counters whose share prices have leapt several fold.

The benchmark FBM KLCI dropped marginally by 0.28%, or 5.34 points, to 1,855.74 points yesterday.

Etiqa Insurance & Takaful Bhd head of research Chris Eng concurred that Malaysian small-cap counters are relatively pricey compared with the big-cap stocks. “The small-cap stocks are outperforming the big-cap [ones],” he said.

Eng felt that the weakening in the second half of April served as an indicator of possible stronger selldown or greater decline in the following month. “It will go down further in May,” he said.

Commenting on the overall market, Eng said: “We will witness some weaknesses in the second half of April due to poor economic data. Domestically, we are uncertain of the implementation of the goods and services tax, whether it would be delayed.”

He noted that it was unexpected that US corporate results had came in quite solid, which prompted rallies in the global equity markets. It was reported on April 22 that Standard & Poor’s 500 Index and the Nasdaq posted a sixth straight session of gains, led by the healthcare sector in the US.

Eng said the FBM KLCI would take cues from the coming corporate results announcement next month, adding that the implementation of higher wages and the increase in utility bills would eat into corporate earnings.

This article first appeared in The Edge Financial Daily, on April 29, 2014.