DSE wants to go slow

The Dhaka Stock Exchange (DSE) wants to go slow in collecting information from the brokerages about the recent rising shares of junk companies taking the present market situation into account.

On Wednesday, it wrote to the securities regulator to extend the report submission period by additional 15 working days about the companies having more than 40 price-to-earnings (PE) ratios.

On September 28, the Bangladesh Securities and Exchange Commission (BSEC) directed the DSE to report back about the reasons behind the skyrocketing prices of low-performing companies within 15 days.

It also ordered the bourse to find whether margin loans were disbursed against the securities with a higher PE ratio.

The stockbrokers are not allowed to provide loan facilities to their clients to purchase shares with a PE ratio of above 40 as per the securities rules.

“We would like to inform you that we have been putting all-out efforts in accomplishing the assigned jobs effectively,” said the DSE in the letter.

“Besides, due to the recent volatility in the capital market, we moved a little bit slowly in collecting required information from the TREC Holder Companies, which further warrants the need for additional time,” it said.

However, it said, verifying a volley of data submitted by the TREC companies regarding the issue in addition to regular job responsibilities of the concerned officers is taking time.

The PE ratio refers to a valuation ratio of a company’s current share price compared with its earnings per share.

According to the DSE data, among 390 companies and mutual funds listed on the Dhaka bourse, 80 companies have a PE ratio of more than 40.

If a company’s PE ratio is lower than 15, it is considered investible. If it ranges between 16 and 25, the investment decision is called moderately risky. When it goes over 25, it is usually considered so risky, analysts say.

Besides, some companies saw their share prices soar abnormally in recent times despite no undisclosed price-sensitive information.

Following the ‘abnormal’ price hikes, the DSE served show-cause notices on the companies in the last three weeks.

Manipulators usually target small-cap stocks as their prices can easily be manipulated, according to dealers.