Insurance stocks go wild on rumours
Insurance stocks went wild on the trading boards in the past few days due to high investor participation fuelled by rumours.
Although the index remained flat yesterday, most insurance stocks were in the black with nine out of the top 10 gainers belonging to the sector.
The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), shed 2.67 points, or 0.05 per cent, to 4,997.99 yesterday.
Of a total of 48 insurance stocks, nine dropped, two remained unchanged and 37 rose on the DSE board.
These stocks have been victimised by rumours as there is no significant news for the insurance sector that could have led to the recent rise, said a top official of a merchant bank.
However, the commission income for insurers will rise as they are following the lower commission rate guideline as directed by the Insurance Development and Regulatory Authority (IDRA), he added.
In 2010, the IDRA issued a circular stating that insurance companies could no longer pay more than 15 per cent of the premium as commission to their agents.
But since most insurers disregarded the directive, the IDRA issued another notice in late 2019, urging insurance companies to comply for the sake of the sector's well-being.
In the past, many companies offered as much as 60 per cent of the premium as commission in a bid to secure business and this hurt the industry's overall revenue, according to industry insiders.
"But that does not mean that these stocks deserve to rise by around double amid the pandemic," the merchant banker said, adding that a certain rumour led to increased interest in insurance stocks.
The rumour is that the chairman of the Bangladesh Securities and Exchange Commission was involved with the insurance sector and therefore wishes to see it flourish in the capital market.
Following pharmaceuticals, insurance stocks have been traded the highest on the boards since July.
Takaful Insurance topped yesterday's gainers' list with a 9.94 per cent increase followed by Continental Insurance, Karnaphuli Insurance, Prime Insurance and Northern Insurance.
Beximco Pharmaceuticals led the trading board with trade worth Tk 63 crore followed by Beximco and Sandhani Insurance.
Familytex Bd shed the most, dropping 10 per cent followed by C&A Textile, AB Bank First Mutual Fund, SEML IBBL Fund and Prime Finance.
Of the total 355 companies to witness trade, 133 advanced, 171 declined and 51 remain unchanged.
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