Five insurance companies’ stock prices trebled in a space of two months and then came crashing down at a time when leading insurers saw next to no movement, in a stunning case of smash-and-grab by a section of players.
In the first two months of the year, stocks of Sonar Bangla Insurance soared to Tk 68 from Tk 15.3, according to data from the Dhaka Stock Exchange (DSE). Yesterday, the insurer’s stock traded at Tk 31.
Not only Sonar Bangla, there was ebb and flow in four other insurers’ stocks in the last eight months. And in the process, many retail investors lost their money as they mopped up their stocks seeing their prices spiral.
United Insurance’s stock jumped to Tk 83 from Tk 22 within two months and then fell to Tk 62.
Provati Insurance’s rose to Tk 43 from Tk 17 and fell to 24. Agrani Insurance’s stocks rose to Tk 43 from Tk 15 and then downed to Tk 24. Asia Insurance was also jumped to Tk 39 from Tk 16 and then again dropped to Tk 24.
Such a rise and fall can only be orchestrated by rumours, said Mohammad Musa, dean of United International University’s School of Business and Economics.
“Gamblers are doing it, sometimes, with the help of the company, brokerage houses and investors.
They are very smart now and know how to play the game cleanly, without getting the regulator on their tails.”
The regulator cannot say anything if an investor buys shares legally, but it has to be vigilant of serial trading or the company hiding price-sensitive information, he added.
The latest report of the Insurance Development and Regulatory Authority (IDRA) shows Popular, Fareast, National, Pragati and Prime are the well-performing listed life insurers based on premium and claims settlement.
But the insurers’ stocks hardly saw any movement in the last eight months.
It is the same for general insurance companies: stocks of Green Delta, Pioneer, Reliance, Pragati and Republic did not rise or fall much.
“Speculation fuelled those companies’ stock prices,” said Sheikh Kabir Hossain, president of the Bangladesh Insurance Association (BIA).
Sometimes, it is seen that the share price of a company rises without no logical ground and the company is helpless in stopping it.
“However, insurance companies will grow in future because many problems of the sector are being solved,” said Hossain, also the chairman of Sonar Bangla Insurance.
A top official of the Bangladesh Securities and Exchange Commission said, requesting not to be named, they always follow the surveillance system to see if anyone is doing anything illegal.
“But, the gamblers are playing the game jointly within the legal framework, so we can’t stop them. Moreover, we have fined some gamblers recently for their wrongdoing,” he said, adding that general investors should be cautious about putting their money in risky stocks.