Home ›› 04 Apr 2023 ›› Stock
Shares of many small-cap companies continued to rise sharply in the Dhaka Stock Exchange (DSE), the country’s prime bourse, in the last few trading sessions, while stocks of most large-cap firms remained stuck at their floor prices.
Analysts and stock market insiders said this is not a good sign for the country’s stock market.
If the trend goes unabated, it would pose a threat to the market stability, they said.
Recently, many investors were seen rushing towards rumor-based junk stocks, which helped many small-cap issues top the gainers board, market insiders said.
Some people spread rumours that some big investors were pouring big funds into these companies so their prices continued to rise, they said.
All the top five gainers at the capital bourse yesterday were the ‘B’ category or low-performing companies.
When a company fails to provide at least a 10 per cent dividend to its shareholders, it is downgraded to the ‘B’ category from the A category.
Samata Leather Complex, a B-category company, saw the highest hike in its share price by 10 per cent on Monday at the Dhaka bourse.
It was followed by BD Autocars with 9.9 per cent, Legacy Footwear 9.9 per cent, Union Capital 8.9 per cent, Standard Ceramic Industries 8.2 per cent, and Gemini Sea Food 7.4 per cent.
However, share prices of most large companies with billion-dollar market capitalisations remained stuck at their floor prices on the Dhaka bourse on Monday.
Even, Grameenphone, Walton Hi-Tech Industries, British American Tobacco Bangladesh (BATBC), Square Pharmaceuticals, Robi Axiata, and Renata Ltd hit to their floor prices.
On July 28, 2022, the securities regulator, in its latest move, reintroduced the floor price for stocks that is still in place, a measure designed to curb market volatility.
“The opening price of any listed security shall be set at the average of the closing price of July 28, 2022 and the closing price of the immediately preceding four trading days,” the BSEC said in its order.
“The average price, calculated for each security, will be considered the floor price and the lowest limit of the circuit breaker,” it said.
“The latest action was taken in light of the recent global economic strains and to protect investor interests,” the BSEC stated.
Previously, the securities regulator took a similar step in an attempt to limit the free fall of share prices during the Covid-19 outbreak on March 19, 2020, when the DSEX fell below the 3,000-level.
Commenting on the recent market trend, AB Mirza Azizul Islam, former finance adviser to the caretaker government, told The Business Post, “This is not a good sign for the capital market. Those who buy junk shares should be examined.”
The securities regulator should take legal action against price manipulators, he opined.
Policy Research Institute’s (PRI) Executive Director Ahsan H Mansur warned that general investors should be careful about buying shares of the low-performing companies as their prices can plummet as fast as they soared.
According to a survey conducted by the Center for Policy Dialogue (CPD), the Bangladesh Securities and Exchange Commission (BSEC), the country's securities regulator, still intervenes very little on listed companies, which is a barrier to ensuring a vibrant capital market in the country.
The principle role of the BSEC, as per the securities laws, is to supervise the listing procedures of companies on the stock exchanges.
Monday’s market trend
Dhaka stocks failed to retain the upward momentum on Monday as investors turned cautious and joined the late hour sell-frenzy amidst the absence of any major trigger in the market.
But many low-performing stocks displayed excellent performance yesterday.
The DSEX, the broad index of the Dhaka Stock Exchange (DSE), dropped 4.34 points to settle at 6,213 against 6,217 in the previous trading session.
Among other indices, the DS30, the blue-chip index, fell 0.09 per cent to 2,207 and the DSES, the shariah-compliant index, slid 0.30 per cent to 1,348.
Although the market initially showed upward momentum, the indices failed to sustain their gains and the bourse experienced correction at the end of the session, said EBL Securities, a stockbroker, in its daily market review.
This was largely due to constant selling pressure from investors, who speculated that the central bank's interest rate policy could worsen liquidity conditions in the capital market, it added.
Meanwhile, the Dhaka bourse witnessed an increase in participation, with the DSE turnover rising by 8.3 per cent to Tk 575 crore against Tk 531 in the previous session.
The IT sector topped the turnover chart with a contribution of 20.0 per cent to the total turnover of the DSE, followed by food (10.5 per cent) and travel (10.2 per cent).
Most sectors displayed negative returns, with the paper posting the highest correction of 1.9 per cent, followed by jute (1.8 per cent) and services (1.4 per cent).
On the other hand, life insurance posted the highest gain of 0.7 per cent, followed by miscellaneous (0.4 per cent) and travel (0.2 per cent).
Samata Leather Complex Ltd. topped the gainer list with a return of 10 per cent, while Oimex Electrode Limited was the day’s worst sufferer with a loss of 4 per cent.
Out of the issues traded, 54 advanced, 69 declined, and 269 remained unchanged on the DSE.
The port city bourse, CSE, also settled on red terrain, with its two major indices – the selected indices (CSCX) and the all-share price index (CASPI) – inched down by 0.8 points and 1.4 points, respectively.
