December delivers record gains for high-risk junk stocks
The unexpected rally has sparked curiosity among analysts
In December, investors achieved the highest returns on junk stocks, including Miracle Industries, Sharp Industries, and Hami Industries, as highlighted in the monthly market wrap-up by LankaBangla Securities.
The brokerage firm recently released its December report, highlighting that investors earned a 47.73% return from Miracle Industries shares, while Sharp Industries delivered a 43.21% return and Hami Industries yielded a 34.96% gain.
According to the market wrap-up, the benchmark index DSEX of the Dhaka Stock Exchange (DSE) witnessed a slight gain by 0.46%, closing at 5,216 at the end of December. But the daily average turnover dropped 28% to Tk362 crore.
Market insiders said the top gainers, including Miracle Industries, Sharp Industries and Hami Industries, were considered fundamentally weak, as they were traded under the Z category due to the absence of dividend declarations and non-operation.
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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, pointing to 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 the DSE, Miracle Industries has been incurring losses for several years, with its last dividend paid in FY20. On Monday, its shares closed at Tk29.20.
Hami Industries, also suffering losses for years, managed to post a profit following a change in ownership. However, after the death of its new managing director, the company faced renewed challenges. Its shares closed at Tk129 on Monday.
Sharp Industries, formerly known as RN Spinning, incurred losses until FY23. In an effort to turn around, the company merged with Samin Food and Beverage Industries and Textile Mills Ltd. The merger led to profitability, enabling the company to declare a dividend in FY24. On Monday, its shares closed at Tk24.
Besides, the monthly top losers are New Line Clothings, Emerald Oil and BIFC. They have been downgraded to the Z category by the DSE for failing to pay dividends.
