Date
23 March 2017
After an end-of-quarter surge, the stock prices of some third- and fourth-tier firms have come crashing down to earth. Photo: HKEJ
After an end-of-quarter surge, the stock prices of some third- and fourth-tier firms have come crashing down to earth. Photo: HKEJ

Penny stocks sold off as second quarter begins

Money is fleeing from penny stocks after a brief surge in their prices at the end of last month, the Hong Kong Economic Journal reported Wednesday.

Twelve of the 20 stocks that fell the most on the Hong Kong stock exchange Tuesday were penny stocks. 

The surge among third- and fourth-tier stocks at the end of March was the result of end-of-quarter window dressing by certain funds, Hong Kong Institute of Investors chairman Ricky Tam Siu-hing said.

Those funds, which mainly hold blue chips, are usually unable to achieve rapid gains, Tam said.

So, the funds bought penny stocks to create a short-term jump in their portfolios’ value, taking advantage of a leap of 50-60 percent in the prices of such stocks on their quarterly financial results, he said.

The market makers of certain Chinese companies in the gray market in mainland China may also have marked up their stocks, Tam said.

Meanwhile, the selling pressure on Chinese banks has been increasing in the short run amid speculation about the details of the central government’s proposal for the lenders to exchange the debt owed to them by state-owned enterprises for equity in those firms.

The proposal is being made in an attempt to clear 1 trillion yuan (US$150 billion) of non-performing loans in the next three years.

[Chinese version中文版]

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