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Do Not Focus on Price of Penny Stocks
In response to comments by SGX chief executive Magnus Bocker that stocks should not be trading at a few cents, I wrote a letter to ST Forum on 12 November 2013. My letter was published on 13 November 2013. I have appended a copy of my letter below.
Do Not Focus on Price of Penny Stocks
THE recent penny stock saga has led the Singapore Exchange to review the rules for this sector (“SGX looking at new penny stock rules”; last Saturday).
While this is positive, I am concerned about the statement by SGX chief executive Magnus Bocker that stocks should not be trading at a few cents.
In Singapore, the minimum lot size is 1,000 shares. In contrast, an investor in some other countries like the United States can buy even one share. To invest in a 10-cent share, an investor here needs to pay $100, which is already higher than what many shares in the US trade for.
In reviewing the rules, the SGX should not focus on the absolute price of the shares, but on the market mechanism and corporate governance.
Contra trading should be eliminated or reduced, and the punishment for non-compliance to listing rules should be heavily enforced.