The prices of low-profile stocks at the Dhaka bourse surged in 2016 as 10 ‘Z’ category scrips were among the 40 companies which witnessed share price increase ranging from 50 per cent to 586 per cent in the year.
Though not under the junk category, most of the remaining 30 companies are considered fundamentally poor.
Stock market experts said investors’ rumour-based investments and imprudence in making investment decisions were major reasons for the abnormal hike in junk companies’ share prices.
Lack of effective regulatory action against manipulators and rumour-mongers has also contributed to the unhealthy state of affairs at the stock market, they said.
The 10 ‘Z’ category companies that saw share price surge in 2016 are Zeal Bangla Sugar Mills, Shyampur Sugar Mills, Rahima Food, BD Autocars, Kay & Que, Aziz Pipes, Modern Dyeing and Screen Printing, Midas Financing, Meghna Pet Industries and Beacon Pharmaceuticals.
For example, the share prices of Zeal Bangla Sugar Mills rose by Tk 38.70, or 586 per cent, to Tk 45.30 on December 29, the last trading session of the year 2016, from Tk 6.60 on January 3, the first trading session of the year.
The company has been suffering heavy losses for years and its accumulated losses stood at Tk 231 crore on June 30, 2016 meaning that loss per share was Tk 385.
The share prices of Shyampur Sugar Mill rose by Tk 19.90, or 306 per cent, to Tk 26.40 on December 29 from Tk 6.50 on January 3.
According to the latest annual report, Shyampur Sugar’s accumulated losses stood at Tk 298.98 crore including Tk 34.82 crore in the year ended on June 30, 2016.
‘A’ category scrip Eastern Lubricants was the third biggest gainer in the outgoing year with a 295-per cent or Tk 902.8 rise in its share prices. The price of Eastern Lubricants shares was at Tk 305.60 on January 3 which increased to Tk 1,208.40 on December 29.
According to Eastern Lubricants’ first quarterly report for the July-September period, the entity incurred losses of Tk 1.80 per share against profit of Tk 35.24 per share in the same period of the previous year.
‘Although the capital market investors have suffered a lot [due to 2010 market crash], they have yet to learn the lesson,’ former interim administration adviser AB Mirza Azizul Islam told New Age on Friday.
‘There was no logic in the investors’ decisions to invest funds on such fundamentally poor companies,’ he said.
Even though preventing investors from making rumour-driven investments is a difficult task for the Bangladesh Securities and Exchange Commission, the regulator should investigate whether there was presence of any insider trading, he said.
Rahima Food, the fourth in terms of price hike in 2016, incurred Tk 1.32 crore in losses during the year ended on June 30, 2016.
Despite the fact, the share prices of Rahima Food increased by 220 per cent, or Tk 82.50, to Tk 119.90 on December 29 from Tk 37.40 on January 3 mainly due to investors’ rumour-based investments following a confusing announcement made by the company regarding its ownership change.
The BSEC at the fag end of the year formed a committee to investigate unusual hike in the share prices of seven companies.
The seven companies are: Fine Foods Limited, BD AutoCars, Meghna Pet Industries, Meghna Condense Milk Industries, Zeal Bangla Sugar Mills, Imam Button Industries and Shyampur Sugar Mills.
Although the BSEC forms
investigation committee on many occasions, the findings of most of the committees remain undisclosed.
For example, the commission on June, 2016 formed a committee to investigate insider trading of the shares of Chemical Industries, Familytex and RN Spinning Mills, but the regulator is yet to take any further action in this regard.
With a view to containing rumour-mongering through Facebook pages, the capital market regulator in April, 2016 issued a letter to the Bangladesh Telecommunication Regulatory Commission, seeking closure of 100 FB pages. The pages are yet to be closed.
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