Weak stocks deliver highest returns in November despite market volatility

Infographic: TBS

Despite market volatility throughout November, investors saw the highest returns from fundamentally weak stocks such as Emerald Oil, Mithun Knitting and Jute Spinners, according to the monthly market wrap-up by LankaBangla Securities.

The brokerage firm recently released its November report, highlighting that investors earned a 39.56% return from Emerald Oil shares, while Jute Spinners delivered a 33.81% return and Mithun Knitting yielded a 29.73% gain.

According to the market wrap-up, the benchmark index DSEX of the Dhaka Stock Exchange (DSE) dropped by 3.51%, closing at 5,017 at the end of November. The daily average turnover jumped 37.5% to Tk501 crore.

Market insiders noted that the top gainers, including Emerald, Jute Spinners, and Mithun Knitting, were considered fundamentally weak, as they were traded under the Z category due to the absence of dividend declarations and non-operation.

The unexpected rally has sparked curiosity among analysts, who attribute it to speculative trading, investor optimism, or rumours of potential restructuring.

However, market experts advise caution, emphasising the inherent risks of investing in financially unstable or dormant companies.

Investors appeared to flock to these underdogs, driven by speculation around potential recoveries, sector-specific developments, or short-term profit opportunities, according to the market insiders.

According to a recent statement from the DSE, Emerald Oil reported that its operations are currently halted due to an insufficient gas supply to its factory. To address the issue, the company has imported a 12-tonne capacity high-pressure husk boiler, which is expected to enable full-scale production once installed.

Emerald Oil assured that production will resume shortly after the installation process is completed. Despite the operational halt, the company emphasised that it has not retrenched any employees, demonstrating its commitment to retaining its workforce during this challenging period.

The DSE downgraded Emerald Oil Industries to the Z category on 3 December, following the suspension of its operations for more than six months.

Emerald Oil has yet to declare a dividend for fiscal year 2023-24 and has also failed to release its third-quarter financial statement within the stipulated timeframe.

In response to the DSE query over the recent price hike, the company has informed that there is no undisclosed price-sensitive information of the company for the recent unusual price hike and increase in the volume of shares.

Meanwhile, Jute Spinners got a High Court order to hold the pending annual general meetings for eight years, but it decided not to pay any dividend for those years.

In October, the Bangladesh Securities and Exchange Commission (BSEC) cancelled its approval for the takeover of Mithun Knitting and Dyeing Limited by Destination Express International DEX-1 Limited, a China-based courier service provider.

Other top performers for the month include Fine Foods with a 35.87% return and Doreen Power with a 31.43% gain, according to the gainers' table.

Fine Foods and Doreen Power has declared dividends to their shareholders for the last fiscal year.

Besides, the monthly top losers are New Line Clothings, Phoenix Finance and Prime Finance. They have been downgraded to the Z category by the DSE for failing to pay dividends.