“IRRATIONAL exuberance” is a phrase used by the then Federal Reserve Board chairman, Alan Greenspan, in a speech given at the American Enterprise Institute during the dotCom bubble of the 1990s.
The phrase was interpreted as a warning that the market might be somewhat over-valued.
Could the same be said of some penny stocks on Bursa Malaysia that seem to have attracted tremendous investor interest mainly because their projects have been featured in the new Economic Transformation Programme (ETP)?
It is difficult to comprehend how some of these penny stocks can have their value increased by so much in such a short span of time. Naturally, the question that investors should be asking is, are there sufficient fundamental reasons for these shares to climb up so much?
A few facts need to be reiterated.
Firstly, Tricubes Bhd, the company that will be undertaking the RM50mil 1Malaysia e-mail project, is still a GN3 company (because its shareholders' funds have shrunk to less than 50% of its paid-up capital) and it has yet to submit its regularisation plan to Bursa Malaysia.
Fact two: none of the ETP projects that Tricubes and other similar stocks are associated with, are like the old-styled government awards where the beneficiary gets paid by the Government for carrying out a project. This is a hallmark of the ETP - without the Government having to fork out huge sums of money, projects are facilitated in other ways so as to bring about the desired results of economic activity.
Fact three: the business model of these projects are still not clear, meaning no one really knows how much money these small companies are going to be making from executing these ETP projects.
Interestingly, investors who had punted on companies like Tricubes and Karambunai (more so if they were privy to the information about these projects before they were announced, which would have meant a lower entry cost for the investors), their gains would match or possibly better those of astute fund managers who spent a lot of time and trouble trying to suss out the right companies to invest in. . .
The phrase was interpreted as a warning that the market might be somewhat over-valued.
Could the same be said of some penny stocks on Bursa Malaysia that seem to have attracted tremendous investor interest mainly because their projects have been featured in the new Economic Transformation Programme (ETP)?
It is difficult to comprehend how some of these penny stocks can have their value increased by so much in such a short span of time. Naturally, the question that investors should be asking is, are there sufficient fundamental reasons for these shares to climb up so much?
A few facts need to be reiterated.
Firstly, Tricubes Bhd, the company that will be undertaking the RM50mil 1Malaysia e-mail project, is still a GN3 company (because its shareholders' funds have shrunk to less than 50% of its paid-up capital) and it has yet to submit its regularisation plan to Bursa Malaysia.
Fact two: none of the ETP projects that Tricubes and other similar stocks are associated with, are like the old-styled government awards where the beneficiary gets paid by the Government for carrying out a project. This is a hallmark of the ETP - without the Government having to fork out huge sums of money, projects are facilitated in other ways so as to bring about the desired results of economic activity.
Fact three: the business model of these projects are still not clear, meaning no one really knows how much money these small companies are going to be making from executing these ETP projects.
Interestingly, investors who had punted on companies like Tricubes and Karambunai (more so if they were privy to the information about these projects before they were announced, which would have meant a lower entry cost for the investors), their gains would match or possibly better those of astute fund managers who spent a lot of time and trouble trying to suss out the right companies to invest in. . .
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