In 2013, low-cap stocks saw abnormal gains

Many low-cap listed companies showed abnormal gains ranging from 50 percent to 328.5 percent although the volatile market experienced a 4.3 percent overall gain in 2013, according to Dhaka Stock Exchange data.
A number of low capitalisation stocks generated gains without price sensitive information or expansion plans to substantiate them, said Wali-ul-Maroof Matin, managing director of Alliance Capital Asset Management.
The stockmarket regulator had asked the DSE to look into the abnormal price hike of some 15 low-cap companies. The DSE has already submitted its report to the regulator for further action.
The companies' earnings remained flat and the trend of declaring cash dividends was poor, Matin said.
Some traders poured money into low-cap stocks which suddenly inflated their prices, he said.
“The regulator now has modern surveillance technology and can bring such abnormal price hike under the scanner.”
The Bangladesh Securities and Exchange Commission, the regulator, has launched its own surveillance software in 2012 in an effort to detect manipulative stock trading in the secondary market.
The regulator should take action against the companies, which generate abnormal gains without any price sensitive information, Matin said.
The regulator only issues show-cause notices to the companies, which is not enough, he said. “Such stocks should be delisted.”
Bangas generated the highest gain of 328.5 percent in 2013 for the second consecutive year. The company declared no cash dividend for the last four years, according to DSE. It announced only stock dividends.
The price-earnings ratio of the company is 91.67, which is indicating that the share price is overheated. Its share price stood at Tk 477.20 on December 27.
Some leading stockbrokers and investment bankers did not want to talk about the low-cap stocks' price hike, fearing it could create an image crisis in front of foreign investors.
“I don't want to talk about low-cap firms that have no potential,” a stockbroker said.
“We are not allowing investors to buy low-cap stocks through our brokerage houses,” he said. “Our research team is also not working on the low-cap stocks.”
The firms with capital ranging from Tk 40 lakh to Tk 31 crore saw an abnormal price hike amid a slow mood in the market, which led investors to buy shares at higher prices and count losses, said an investment banker on condition of anonymity. The BSEC is working on the issue of the abnormal price hike, an official of BSEC said.

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