Junk stocks lead weekly gains
Analysts suggest that speculative trading and short-term profit motives may have fueled the rally
Junk stocks unexpectedly topped the gainers' list on the Dhaka Stock Exchange (DSE) last week, indicating that market manipulators remain active despite strict regulatory actions aimed at curbing such activities.
Despite their reputations for weak fundamentals and irregular compliance, investors showed significant interest in these stocks, pushing their prices upward, according to market insiders.
According to EBL Securities' weekly market review, shares of Khulna Printing and Packaging, a non-operational company owned by SBAC Bank's former chairman SM Amjad Hossain – allegedly involved in money laundering – jumped 30.4% to reach Tk13.3 last week.
The DSE sent a query letter regarding the unusual hike in the price and volume of shares to the company on 6 January via email and hard copy. However, as of Thursday, the company has not provided any response to the query.
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Other top gainers included Khan Brothers PP Woven Bag, Shurwid Industries, Information Services Network, Zaheen Spinning, FAS Finance, GQ Ballpen, and Associated Oxygen – all classified as junk stocks due to poor corporate governance practices and consistent losses. Despite their financial shortcomings, these companies saw significant increases in share prices, according to the review.
Analysts suggest that speculative trading and short-term profit motives may have fueled 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 totaling approximately Tk700 crore on market manipulators to deter such misconduct in the future.
Meanwhile, the benchmark index DSEX of the Dhaka Stock Exchange (DSE) edged down by 0.10%, closing at 5,194 points, while the blue-chip index DS30 slipped by 0.35% to end at 1,924 points.
Market performance was mixed, with 136 stocks advancing, 205 declining, and 56 remaining unchanged.
Investor participation remained subdued, with the daily average turnover at the DSE stagnating at Tk300 crore.
EBL Securities, in its weekly market review, noted that the capital bourse observed lackluster trading activity throughout the week, with the benchmark index settling into negative territory as market sentiment has yet to rebound from its prolonged depressed state due to the absence of any strong positive catalyst to revive investor confidence.
Despite cautious optimism among investors surrounding the finance adviser's meeting with capital market stakeholders, such optimism failed to sustain due to a lack of concrete commitments that could restore the market's waning momentum, the review added.
Moreover, concerns over higher inflation following the potential increase in VAT on certain goods and services also triggered further caution regarding the market's momentum, EBL Securities reported.
Investors were most active in the banking sector, which accounted for 17.9% of the DSE's daily average turnover, followed by the pharmaceutical sector at 13.7% and the engineering sector at 9.1%.
Sectoral performance was mixed, with the IT sector emerging as the top gainer, posting a 4.3% increase, while the ceramic sector recorded the largest decline.
Chittagong Stock Exchange (CSE) also ended in the red last week, with its general index CSCX losing 0.70% to close at 8,797 points, and the all-share price index CASPI dropping 0.63% to end at 14,459 points.
