Shahjibazar hits the lower price band spot market debut

Shahjibazar Power Company yesterday made its trading debut on the spot market and along the way, hit the lower end of the price band and the circuit breaker.

The power company's entrance in the spot market comes after a decision by Bangladesh Securities and Exchange Commission, taken to contain the stock's price spiralling.

Spot market trading means investors will have to pay cash for the transaction and the settlement period would be just one day. The BSEC also marked Shahjibazar stocks as non-marginable, meaning that the investors cannot buy those on credit.

The circuit breaker does not allow the price of a stock to go up or down by a certain limit for the day. As per the circuit breaker, each Shahjibazar share was allowed to go down by Tk 29.6 at most, with the stock price staying put at that level for the rest of the day.

Only 5,800 shares of Shahjibazar traded on the Dhaka Stock Exchange, generating a turnover of Tk 0.18 crore. Shahjibazar shares closed the day at Tk 309.2, plunging by 8.73 percent.

Spot-market trading means the supply or availability of the stock in the market, with the adequate supply often reducing the price.

Additionally, all stockbrokers were directed to submit daily details on their transactions of Shahjibazar shares to the stock exchanges, which, in turn, will send a report to the regulator the following day.

The measures come as part of the regulator's desperate attempts to curb the unusual price hike of Shahjibazar shares, which rose 828 percent since its listing on July 15 to Tk 338.8, as of Tuesday.

On November 9, the BSEC had tasked a two-member committee to report on the unusual price hike of Shahjibazar within 15 working days.

Earlier, the stockmarket regulator had fined five directors of the company Tk 10 lakh each and the managing director Tk 5 lakh for doctoring the net profits in the financial reports.

In another development, Khan Brothers PP Woven Bag Industries, which made a stellar trading debut on Monday, rising eight-fold, dropped 16.71 percent yesterday.

Each share of the company traded between Tk 62 and Tk 86, before closing at Tk 63.8 on the Dhaka Stock Exchange. A total of 24.16 lakh shares worth Tk 17.59 crore traded on the premier bourse.

Even after yesterday's fall, the price earnings ratio stood at 46, indicating that investment on the new shares still remains risky.

The PE ratio determines the time an investor needs to wait to get back investment, and it is used to gauge the extent of risk an investment might entail.

The company saw a high-flying start despite the declining net profit in the first quarter. Khan Brothers' net profit fell 9.54 percent year-on-year to Tk 2.18 crore in the first quarter to September.

It raised Tk 20 crore by floating two crore ordinary shares of Tk 10 each. The BSEC approved the initial public offering on June 24.