In the unpredictable stock market movements with a small gap between VN Index and HASTC Index, the group of penny stocks suddenly received the inflow of large money amount and continuously increased in prices.
The upward trend of penny share prices usually starts when blue chips came to the last stage of growth process. However, the market movement during the past two weeks showed another tendency. While blue chips had to suffer a high pressure of strong offloads, speculators were seeking profits in penny stocks at cheap prices.
An initial survey on 116 penny shares (of the companies with the smallest capitalisation and below 300 billion dong on Ho Chi Minh Stock Exchange-STC) showed that the average growth of these share prices was better than VN Index in last two weeks.
The index of 116 share prices and VN Index both slipped to the bottom on February 24, 2009. But in the ten following sessions (to March 10), the price of penny shares surged 8.98% while VN Index only grew 6.96%. Especially, the group of top 26 share codes with the largest capitalisation on STC rose by 6.43% in prices while the price of four fund certificates was up 1.73%.
Among penny shares, the profitability ratio of TTP jumped 20.13%, SFI 25.22%, BMC up 33.33% in the same period, proving that the money flow now focuses on the shares with low capitalisation and market prices. Ending March 10, STC witnessed 58 shares rising with ceiling amplitude among 140 gainers. However, the VN Index only increased 1.62% while prices of penny stocks soared 2.1% on average and those of blue chips up 1.7%. As a result, prices of many shares plunged to below par value that is considered to be a very importantly psychological threshold.
Buying shares at equal or below par value as though investors contribute capital to set up enterprises initially. Although increases in share prices depend on a variety of factors, a low share price seems to contain fewer risks than higher level if the stock market becomes worse.
Some enterprises announced to pay high dividends while their share prices stand at low, So the dividend seems to be more attractive compared with market price and higher than saving rates. Typically, TAC share piece continued rising right after announcing to pay 20% cash dividend. At that time, a high volume of TAC coded shares was purchased at between 14,000 and 15,000 dong per share.
Penny shares usually have a low transparency. In order to push up the share prices, buyers have to gather all scattered supplies on their way. When the distribution of the share volume finishes, share codes’ transparency could decline due to the weakened purchase power. Inexperienced investors could be stuck in their penny stock reserve and could not realise profit as planned.