bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

David Evans

If you take care of the pennies, the pounds will take care of themselves.

Stock exchange chief executive Kwong Ki-chi didn't take care of the pennies and the lost pounds are reported to have run into millions.

However, one might have to question the loss to share-holders, with small investors baulking at the HK$50,000 fee for written legal advice.

If you had already lost a fortune, what is an extra few thousand dollars?

The so-called penny stock fiasco had everybody up in arms.

Back and forth went the hot-stock potato as Hong Kong investors bayed for blood.

Despite the continuing search for a culprit amid what must be the year's biggest public relations fiasco the core question remains - has the quality of listed companies been deteriorating?

The gist of the proposals was that non-performing penny stocks, those failing to meet a consolidation threshold of 50 HK cents, would be de-listed if they failed to consolidate or were persistent loss-makers.

There were also calls for new listing applicants to have a market capitalisation of at least HK$200 million compared with HK$100 million now, while initial public offering prices would have to be set at at least HK$2 per share.

There are about 350 stocks trading at less than 50 HK cents, about 100 of which probably only became penny-stocks after the proposed changes were announced.

There is a need to clean up listed companies in Hong Kong but we believe it is not necessarily the company, and consequently the small investor, that needs to suffer but those that run them.

In the wake of the debacle and with the core question still remaining Lai See  has launched 'A Year in the Life of a Penny-Stock Portfolio'.

What we aim to do is follow the ups and downs of a few selected stocks in order to uncover who are the real rotten apples - the companies or those who run them.

We aim to satisfy the question, albeit using a very small control sample, are Hong Kong penny stocks up to scratch?

Using a combination of analyst reports, financial advice, current trends, a pin and a copy of this paper's market listings, we selected eight stocks [see chart] which could have, under the proposals, found themselves being de-listed.

At regular intervals we will report on company announcements, results and stock performance over the next 12 months.

The selection comes from a range of industries and they are all listed on the main board.

The share prices were all below 50 HK cents when Lai See  selected them, with market capitalisations above and below the exchange's proposed HK$200 million.

They include companies that have made it into the news because of the antics of the major shareholders.

Two of the companies - data storage distributor VST Holdings and menswear manufacturer Tack Fat Group International - were approved for listing by the same body that less than three months later proposed a new set of listing rules under which neither would have qualified.

Just last month our penny-stock pick Starlite Holdings announced a connected transaction that may have left minority shareholders (and now also us) wondering who was really benefiting from the purchase deal.

Chairman and chief executive Lam Kwong-yu announced that Starlite Printers - a subsidiary of the packaging manufacturer - had agreed to buy a couple of factory units and a car parking space from a company owned by his wife, and company director, Yeung Chui for HK$4.3 million.

Among our picks is telecommunications and Internet service provider e-Kong Group, whose shares were above HK 50 cents earlier this year.

Unfortunately the industry in which it operates is out of favour and the company is trading at one HK cent - a long way from its 2000 peak of HK$4.02.

The upshot is that the company could have some upside if and when technology comes back into favour.

In the meantime our portfolio could turn into a penny-stock bonanza, or another penny-stock fiasco.

Graphic: laiseegbz



Our latest goal: make a packet from pennies