Bursa’s move likely to cool down exuberant rise of penny stocks

Harvest designation poser

PETALING JAYA: The designation of Harvest Court Industries Bhd's securities is likely to cool down the exuberant rise of penny stocks over the last few weeks.

On Monday night, Bursa Malaysia said it was designating the shares of timber-related Harvest Court, which essentially means that trading in the counter will now require payment upfront.

Dealers said this could cause concern among traders of penny stocks as Bursa Malaysia could do the same with other such stocks.

Harvest Court's share price has gone up more than ten-fold in the past one month and saw a trading volume which ballooned at an equally fast pace.

Recent filings with the stock exchange show that several Harvest Court directors have been paring down their respective stakes in the company.

Shares of Harvest Court and its warrants were suspended the whole of yesterday in order to facilitate the dissemination of the designation, the stock exchange operator said.

The designation of the securities was due to “excessive speculation” observed in the trading of both securities and had been taken in the interest of ensuring a “fair and orderly” market, it added.

The designation will be effective today until further notice.

Prior to the designation, the counter was issued with two unusual market activity (UMA) queries and several investor warnings by the exchange.

Other companies which have been issued with UMA queries include furniture companies DPS Resources Bhd and SYF Resources Bhd, Hibiscus Petroleum Bhd and technology firm Sanichi Technology Bhd.

In fact, October and November have seen a record number of UMA queries.

Already, news of Harvest Court's designation did not go down well yesterday with some of the counters which have enjoyed spectacular rises in recent days.

DPS, which added 17.5 sen on Monday, finished the day lower by 5 sen to 26 sen while SYF Resources plunged 17 sen to 75 sen.

Bursa Malaysia told StarBiz that the designation is done on the basis “that there has been manipulation or excessive speculation”.

Bursa said the last time it designated a stock was on May 15, 2006 and the stock was Iris Corp Bhd.

Investors may recall that in 2006, two weeks after an UMA query, Bursa Malaysia issued a market alert on Iris. A month later, after a continuous period of increased trading activity that led to Iris' share price gaining more than ten-fold in eight months to RM1.36, the counter was made a designated security.

Iris shares hit limit-down twice after that announcement, sparking major selling among the second and third liner counters.

The exchange said it would continue to monitor the trading activities of Harvest Court.

It added: “As a frontline regulator, we exercise vigilance over trading that takes place, whether it is a penny stock or high value stock, to ensure a fair and orderly market. Where trading concerns are noted, the exchange will conduct a review and take necessary action, including issuing UMA queries or market alerts where appropriate.”

“Like Iris, we can expect Harvest Court's designated status to dampen the current penny-stock exuberance to a certain extent,” said Lim Teck Seng, deputy managing director at JF Apex Securities Bhd.

Meanwhile, Minority Shareholders Watchdog Group chief executive officer Rita Benoy Bushon described the move to designate Harvest Court shares as an “excellent” move.

“I wish they had done it sooner, but better late than never,” she told StarBiz.

She said what happened to the Harvest stock should serve as a warning to traders who buy into stocks solely on rumours and market talk