At a time when investors are losing money on good stocks, gambling on underperforming companies is rampant.
In the last three weeks, the prices of 10 badly-performing companies’ stocks soared 9 to 37 percent for seemingly no reason, when the overall market fell 4.26 percent, according to data from the Dhaka Stock Exchange.
The companies too informed the DSE that there is no reason for the abnormal price hike of the stocks.
The share price of Kay & Que, which was upgraded to ‘B’ category last year after languishing in the ‘Z’ category for seven years, jumped to Tk 235 from Tk 179 in the last three weeks.
If a company fails to provide less than 10 percent dividend then it is put in the ‘B’ category and if it fails to provide any dividend it becomes a ‘Z’ category stock.
Kay & Que’s earnings per share (EPS) stood at Tk 0.65 in the last three quarters, down from Tk 0.69 a year earlier.
What is more, the company itself informed the investors that there is no reason for the abnormal price rise.
“Some people are playing with the stocks. Otherwise, it could not jump such a way,” said a top official of a leading merchant bank.
He went on to blast the stock market regulator for not taking instant steps when prices of poorly performing companies are soaring.
The Bangladesh Securities and Exchange Commission (BSEC) can easily find out how and who are playing behind the scene, he added.
General investors are losing money by investing in these low performing stocks when their prices are rising, said a stock broker preferring anonymity.
“So, the regulator should take necessary steps when the stocks rose abnormally,” he added.
In the last two weeks, only three companies from the ‘A’ category were among the top 10 gainers.
The three companies also have low market capitalisation, meaning they are easy to manipulate.
Monno Jute Stafflers’ paid-up capital is Tk 2 crore, Wata Chemicals’ Tk 11.85 crore and Stylecraft Tk 5 crore. The three stocks rose 37.3 percent, 20.1 percent and 18.3 percent respectively. A top official of the BSEC said, requesting not to be named, they have punished some gamblers in the past for breaching the rules and when an abnormal price hike is seen then they try to find the players.
“But the gamblers are very smart and they are manipulating the price within the rules and regulations, so we cannot stop them.”
On this ground, the BSEC is analysing how they can be caught, he said, adding that general investors should be careful before investing their hard-earned money in dicey stocks.