Junk stocks lead DSE gainers, spark market manipulation concerns

Junk stocks unexpectedly topped the gainers' list on the Dhaka Stock Exchange (DSE) yesterday, raising concerns that market manipulators are still active despite increased regulatory efforts to curb such activities.  

These stocks, known for their weak fundamentals and inconsistent compliance, attracted significant investor interest, driving their prices higher, according to market insiders.  

Notably, 10 out of the top 15 gainers were from the Z category, defying expectations and highlighting potential issues in market dynamics, they added.  

Among the most notable gainers was Nurani Dyeing, a non-operational company, whose shares surged by 10%, hitting the daily circuit breaker limit, to reach Tk4.40.  

However, investors have received no financial updates from the company since FY20 and remain in the dark about its current status.  

Other top gainers included Emerald Oil, Appollo Ispat, VFS Thread, Active Fine Chemicals, New Line Clothings, Delta Spinners, Tallu

Spinning, and Hami Industries – all classified as junk stocks due to poor corporate governance and consistent losses. Despite their financial struggles, these companies saw significant increases in share prices, further fueling concerns about the underlying integrity of the market.  

Analysts suggest that speculative trading and short-term profit motives may have fuelled the rally, as no major changes in fundamentals were observed in most of these companies.  

Market observers warn that while the surge in junk stocks may offer quick returns for some, the inherent risks make them an unpredictable choice for long-term investments. Investors are advised to exercise caution and consider the financial health of these companies before engaging in speculative trades.  

Between September and December, the Bangladesh Securities and Exchange Commission (BSEC) imposed fines totalling approximately Tk700 crore on market manipulators to deter such misconduct in the future.  

Meanwhile, the benchmark index DSEX of the DSE edged down by 0.04%, closing at 5,189 points, while the blue-chip index DS30 slipped by 0.03% to end at 1,913 points.  

Market performance was mixed, with 143 stocks advancing, 209 declining, and 47 remaining unchanged.  

Investor participation remained subdued, with the daily turnover at the DSE stagnating at Tk300 crore.  

EBL Securities, in its daily market review, noted that the benchmark index of the capital bourse ended in red yesterday as investors opted for short-term profit booking and preferred to observe the market momentum following the capital market taskforce's proposal for amendments to margin loan regulations.  

Both buyers and sellers remained active on the trading front to grab the helm of the market momentum. However, sellers slightly outperformed buyers, dragging the benchmark index to settle in negative territory after snapping two consecutive sessions of gains, it added.  

Investors were most active in the textile sector, which accounted for 18.3% of the DSE's daily turnover, followed by the pharmaceutical sector at 12.7% and the food sector at 10.3%.  

Sectors displayed mixed returns, with ceramic, mutual fund, and textile exhibiting the most positive returns on the bourse, while paper, travel, and services exerted the most corrections.  

The Chittagong Stock Exchange also ended in the red, with its general index CSCX losing 21 points to close at 8,780, and the all-share price index CASPI dropping 37 points to end at 14,482.