Penny stock

Stocks with market price below 1 unit of the local currency are called Penny stocks. These are often rather inactive, small-cap stocks. Due to their small-cap and illiquid nature, at times they can be speculated to high volatility.

In the United States, penny stocks can be traded outside formal exchanges (e.g. NYSE, Nasdaq) on the OTCBB (Over the Counter Bulletin Board).

On 25 July 2002, the Hong Kong Stock Exchange and Clearing Ltd. announced that they were looking into new policies to delist penny stocks with market price below HK$0.50. The consultation period was supposed to end on 31 Aug 2002. On 26 July, local penny stocks started a panic slide after 10.45am. Among 370 penny stocks with market price below HK$0.50, 283 (76%) fell. In one day HK$10.9 billion was vapourized, which was equivalent to 10% of the market cap of eligible penny stocks.

 

 

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