Junk stocks win in bearish market

While good shares on falling on the Dhaka Stock Exchange (DSE) due to the deepening Russia-Ukraine crisis, some investors have shown their interest in poor-performing companies.

In the last five trading sessions until Thursday, shares of eight out of ten companies that gained the most on the Dhaka bourse were from the ‘Z’ category companies.

A similar scenario was seen around a year ago when Bangladesh Securities and Exchange Commission (BSEC) took an initiative to bring several weak companies to the mainboard by restructuring their boards.

Capital market analyst Professor Abu Ahmed told The Business Post, “When the fundamentally strong good companies continued to decline, it puts psychological pressure on investors. They make big changes in their investment decisions and focus on weak companies instead of the good ones.”

“Rise in junk company’s stock is not a good sign for the market as retail investors might burn their fingers at the end of the day,” he said.

He suggested that investors rather should opt for a wait-and-see approach under the present situation.

The Russia-Ukraine war will surely bring some economic problems to our economy, but the economy might not feel the pain soon, said Ahmed.

The BSEC should look into the matter, he said.

An analyst at an investment bank recommended that investors should ignore the noise and stay put with their current investments.

“An investor should deploy cash strategically and use the current dip to buy high-quality stocks in a staggered manner,” he said.

Among the ‘Z’ category companies, Meghna Pet Industries’ share witnessed a sharp rise in the past week as its share price closed at Tk 132.2 on Thursday, the sharpest rise of 30.48 per cent from the price recorded in the four trading sessions ago.

Meghna Condensed Milk was the second highest gainer with a 20.61 per cent jump in its share price. Its share, which was Tk 15.10 on February 27, shot up to Tk 19.90 in the week.

It was followed by Savar Refractories, Zeal Bangla Sugar Mills, Imam Button Industries, Jute Spinners, Usmania Glass Sheet Factory, and Shyampur Sugar Mills.

Besides, investors also showed interest in four companies that have recently been brought back from the over-the-counter (OTC) market to the main board after their improvement in good governance and return in profit.

The companies are Tamijuddin Textile Mills, Bangladesh Monospool Paper Manufacturing Company, Paper Processing and Packaging, and Monno Fabrics Limited.