SET investors end love affair with penny stocks

EQUITIES

The Stock Exchange of Thailand has a plan to improve the attractiveness of Thai shares, as most retail investors prefer blue chips to penny stocks.

Chanitr Charnchainarong, a senior vice-president, said many Thai investors are highly educated, so penny stocks - those priced at less than one baht - are less attractive and have thin trading volume.

"When a stock has little volume, the company usually expands its size or delists," said Mr Chanitr.

As of Wednesday, 31 stocks on the SET changed hands for less than one baht each, while the figure for the Market for Alternative Investment was seven.

This is a decline of about 48% from 73 stocks at the end of last year.

"The rapid decline in the popularity of penny stocks reflects changing investor preferences," said Mr Chanitr.

In the past, these were the favourites of speculators and margin traders.

"Investors today are well aware of the dangers of speculation, so they steer clear of these penny stocks," said Mr Chanitr.

He said many investors today tend to enter the market at a younger age than before.

"They're fast learners and understand the benefits of each financial instrument," said Mr Chanitr.

Also, to help pique investors' interest, the SET is encouraging listed firms to split the par value of their stocks or consolidate stocks depending on the case.

"By doing so, your share will be traded regularly and remain attractive to investors," said Mr Chanitr.

He said the recent increase in the SET index and bullish initial public offerings have encouraged listed firms to manage their trading liquidity better.

Mr Chanitr noted stocks trading at a high price should split their par value to attract retail investors further and increase trading liquidity.

Low-priced stocks should adopt a reverse par split to increase their share price and attract investors.

This year 14 companies split their par value for higher liquidity, while three combined their par value.

Mr Chanitr said the number of listed companies with low book value declined to 125 from 191 at the end of last year.

He added that the SET is using this data as part of its plan to improve the SET's image by improving the quality and image of listed firms.

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About the author

Writer: Darana Chudasri
Position: Business Reporter






Article source: http://www.thethailandlinks.com/2012/11/04/set-investors-end-love-affair-with-penny-stocks/