Junk stocks infect market once again

The age-old trend of junk stocks gaining value despite having no reason to advance has returned just when major indices of Bangladesh's stock market are starting to rise.

The DSEX, the benchmark index of the DSE, increased by 14 points, or 0.22 per cent, to 6,339 points. With this, the index rose for two days consecutively.

The DS30, the blue-chip index, advanced 0.05 per cent to 2,199 points while the DSES, the shariah-compliant index, edged up 0.02 per cent to 1,371 points.

Among the top ten gainers, two junk stocks -- Meghna Pet Industries and Meghna Condensed Mills -- took place by rising more than 9 per cent each.

A newly listed company -- Trust Islami Life Insurance -- and three B-category companies -- Legacy Footwear, Union Capital, and Meghna Insurance -- also featured on the list.

When a company incurs loss and fails to pay any cash dividend, it is then considered a junk stock.

If a company cannot pay at least 10 per cent cash dividend to its shareholders, then it is considered a B-category company.

The higher rise of junk stocks and low performing companies compared to good stocks is an old disease of the stock market that was seen relatively less in the last few days, said a stockbroker.

While stock market indices have been rising for the last two weeks, junk stocks have again taken the driving seat.

Whenever the market starts to rise, a vested group starts spreading rumours to manipulate the low performing stocks, he said.

So, general investors should be cautious about investing in these companies, he added.

Turnover, an important indicator of the market, rose 13 per cent to Tk 1,174 crore from Tk 1,036 crore the previous day.

Of the traded securities, 102 advanced, 77 declined and 182 did not show any price movement.

Opportunistic investors increased their participation amid growing confidence ahead of the National Budget declaration, International Leasing Securities said in its daily market review.

Paramount Insurance increased the most by advancing 9.98 per cent followed by Meghna Pet Industries with 9.97 per cent, Trust Islami Life Insurance 9.96 per cent, Legacy Footwear 9.95 per cent and Green Delta Insurance 9.91 per cent.

Jute Spinners topped the list of losers by shedding more than 8.47 per cent. Shurwid Industries, Yeakin Polymer, Bangladesh Monospool Paper Manufacturing and Tamijuddin Textile Mills suffered substantial losses as well.

Anwar Galvanizing was the most traded stock on the day with shares worth Tk 72 crore transacted.

Stocks of Navana Pharmaceuticals, Intraco Refueling Station, Lafarge-Holcim Bangladesh and Sea Pearl Cox's Bazar Beach Resort & Spa also traded significantly.

Stocks listed with the Chittagong Stock Exchange also rose yesterday. The Caspi, the all-share price index of the port city bourse, edged up 47 points, or 0.25 per cent to close at 18,685 points.

Of the issues traded, 84 rose, 57 retreated and 106 did not see any price movement. However, turnover edged down to Tk 19.28 crore from Tk 19.40 crore the previous day.