Penny stocks likely to continue strong performance

We are beginning to see retailers participating more in the stock market. This is mainly driven by the numerous positive news flow locally and abroad recently', says a research head.


KUALA LUMPUR: Penny stocks, which grabbed the spotlight in a big way last week, is expected to continue to dominate the active chart over the near-term, thanks to growing retail investors' confidence, analysts said.

Retailers are also welcoming the Employees Provident Fund's plans to increase its holding of Malaysian stocks.

Last week, the top active stocks were mainly dominated by penny stocks, particularly Focus Dynamics Technologies Bhd, Ariantec Global Bhd and Metronic Global Bhd. These were stocks that previously were "unseen" in the active charts.

Daily trading volume of Focus Dynamics averaged 30 million shares last week, against the daily average of six to eight million a week ago.

Largest volume increase came from Metronic and Ariantec. These two stocks were not even on the top 10 chart a week ago.

Metronic, which registered an average volume of 6.2 million a day two weeks ago, had a daily average trading volume of 97 million last week.

Ariantec, which had an average volume of two million two weeks ago, had a daily average trading volume of 88 million last week.

Last Friday, Metronic and Ariantec registered a trading volume of more than 404 million and 438 million, respectively. Both stocks were also among the three counters queried by Bursa Malaysia Bhd last week for unusual market activities.

"We are beginning to see retailers participating more in the stock market. This is mainly driven by the numerous positive news flow locally and abroad recently.

"We expect sentiment to remain this way over the near term," said the research head of a local brokerage.

The FTSE Bursa Malaysia ACE Index rose marginally (0.1 per cent) to 4,664.76 last week. In contrast, the benchmark FTSE Bursa Malaysia KLCI declined by 0.48 per cent to 1,571.40 points.

A look at last week's trading participation also revealed that retail participation was at 27.8 per cent of total trading value, an improvement compared to February's retail participation of about 25 per cent.

Overall, retailers were net sellers of more than RM140 million worth of shares.

"This is normal, as it basically means that they cash out as they are in the money," said the research head.

Analysts expect the FBM KLCI to trade higher this week, with immediate resistance levels at 1,580, followed by 1,600.

Investors will be keeping a close watch for signs of any improvement in the United States economy.

A good set of US housing data, which will be announced this week, will certainly prolong the investors' positive sentiment.