Stock gamblers still on the prowl | The Daily Star
12:00 AM, October 08, 2020 / LAST MODIFIED: 10:29 AM, October 08, 2020

Stock gamblers still on the prowl

Junk shares skyrocket without valid reasons; BSEC says will look into it

Shares of Zeal Bangla Sugar Mills increased by six times over the past three months, a puzzling development given that the company has declared losses every year since its trading debut in 1988.

"There is no reason behind this jump other than rumours and gambling," said a senior official of a leading stock brokerage.

By the end of last year, Zeal Bangla's accumulated losses stood at Tk 370 crore while its paid-up capital was Tk 6 crore, according to data from the Dhaka Stock Exchange (DSE).

But despite this fact, the state-run company's junk stocks skyrocketed from Tk 31 to Tk 213 as of yesterday over a span of just two and a half months.

However, Zeal Bangla has repeatedly told investors that it does not have any undisclosed price sensitive information that could have caused the unusual price hike.

The sugar miller has been incurring losses for many years now and so, it does not make sense why investors would pour their money into such a company, the official of the stock brokerage said.

"Those who invest in these stocks do it with bad intentions. Therefore, the stock market regulator should investigate whether there was any breach in regulations," he added.

Zeal Bangla is not an isolated case though as another junk stock, Dacca Dyeing, featured in the top gainers' list as its share prices rose over 200 per cent over the past three months.

Dacca Dyeing, which has paid-up capital of Tk 87 crore, was first listed in 2009 but has not been disbursing dividends since 2016.

Paramount Insurance took second place on the gainers' list with a 277 per cent increase. The B category insurance stock rose from Tk 36 to TK 136 over the last three months.

The insurer, with a paid-up capital of Tk 33 crore, made its trading debut in 2007 and disbursed 5 per cent stock dividends for 2018.

During the last three months, the stock market was bullish after remaining bearish for a long time.

As a result, most stocks rose during this period but junk stocks were ahead of the rise.

This tendency is not good for the market because it gives a negative message to the investors, said a merchant banker. So, the regulator should ask big buyers about why they are purchasing non-performing stocks even if they do not breach any rules or regulations by doing so.

The regulator should remain aware of them so that if it finds any irregularities in trading, then culprits can be punished accordingly, the merchant banker added.

BD Finance and Easter Insurance also took place in the gainers' list with the former increasing by 249 per cent while the later by 210 per cent.

Paid-up capitals of Eastern Insurance and BD Finance were Tk 43 crore and Tk 167 crore respectively.

While Eastern Insurance disbursed 20 per cent cash dividend in 2019, BD Finance disbursed 10 per cent stock dividend for the same year.

Over the last three months, 38 companies' stocks rose by more than 100 per cent. Of these, 14 are junk stocks, the DSE data shows.

"These unusual price hikes are a concern so we are looking into the trades to see if there are any irregularities," said a top official of the Bangladesh Securities and Exchange Commission preferring anonymity.

"But, we cannot ask the investors why they buy stocks that don't breach rules," he added. 

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