When the market theme is 'cheaper and faster'

WHEN stocks under 10 cents - and some under five cents - top the actives list, it is customary in some circles to set the alarm bells ringing because: a) It suggests that investors are scraping the bottom of the barrel. b) Retail players are jumping on anything that moves regardless of fundamentals. c) The market is overheating.

Such was the case this week when the average value per unit traded was in the region of 50-60 cents, when penny stocks could chalk up huge volume one day but nothing the next, and when 'cheaper and faster' was clearly the market's mantra.

Of course, whether 'cheaper and faster' equates with 'better' is open to debate.

Yesterday, for example, Top Global was the day's most active stock with almost 200 million shares traded at 3-4.5 cents, while SwingMedia did 187 million shares at 6.5-7.5 cents.

Other notables were Vibropower at 8-9.5 cents, Thakral at 8-9 cents cents and Memstar at 7.5-8 cents.

Although many of the penny stocks that swung into play did so largely through random, rotational punting, a few themes were discernible.

For one, stocks connected to well-known former remisier Peter Lim were popular - namely UPP and Rowsley.

Another popular theme was a commodity play that benefited Golden Agri and GMG, while a 'buy' from Kim Eng Research on China property developer Ying Li, with a target price that represented more than 90 per cent upside, brought the counter quickly into play.

Perhaps more telling, though, was how quickly previous favourites such as Genting Singapore and various China plays seem to have dropped off the screen, thanks to the rotational frenzy which has gripped the stock market.

As for the Straits Times Index, having risen some 101 points in four sessions between April 2 and April 7, it came as no surprise that the index then encountered stiff resistance in its bid to breach 3,000.

The closest it came was 2,996 on Wednesday before a pull-back set in.

Yesterday the index added 8.78 points end at 2,971.97.

For the week, it gained 28 points or just under one per cent.

The Jardine group's inclusion in the ST Index has come under heightened scrutiny in recent weeks because of a perception that the shares are not actively traded and therefore not representative of interest in the local market.

The index's guardians have defended their position by saying there is a set of criteria for index membership and that since Jardine stocks meet these criteria, they have to be included.

Whatever the case, it has to be said that the rise of Jardine stocks to all-time highs - notably Jardine Matheson, Jardine Strategic and Cycle & Carriage - contributed tremendously to the ST Index coming close to regaining the 3,000-mark.

Providing the backdrop was a largely benign Wall Street, where the benchmark Dow Jones Industrial Average looks like it will soon challenge the 11,000 level, notwithstanding US housing and jobs markets that have yet to recover.

A big reason for this is the explicit guarantees US officialdom has been giving the market, namely that interest rates will remain at zero for a lengthy period and also that the 'too-big-to-fail' companies will always be bailed out when trouble hits.

Haha...look like the market here is running out of counters to "play" and this is not a good sign from my past experience. It's like silly money chasing after silly stocks! Maybe it's time to take a breather and step out of the market here!
Then again...there is always rotation play going on for this type of situation, so one cheapie stock to consider is EcoWise. Remember how it can run last Aug/Sept 2009 and on last Friday it may do a replay of the run again! Now it's last done price is 19.5 cts vs it's break peak at 18 cts, so it has legs still to run if got volume!