The prices of low-cap stocks began to rise again, making a mockery of the securities regulator’s efforts to put a lid on unusual price hike of the scrips.
The stock prices of these junk-rated companies have jumped on average by between 150% and 23% in the last month.
Of the low cap companies, CVO Petro Chemical Refinery Ltd came to the spotlight despite the company is not in continuous production in last six months, according to the Dhaka Stock Exchange (DSE).
As soon as it resumed trading on Sunday after two and half month, its share prices increased 7% to Tk943 each. Yesterday, it declined to Tk881.
On September 24, Bangladesh Securities and Exchange Commission (BSEC) suspended trading the share for its abnormal price hike.
The commission found that the scrips of the company were manipulated between April and August when prices jumped more than 100% to over Tk634.
As a result, three companies were fined Tk22lakh, which is lighter than the wrongs they did, said a market player.
The BSEC is now in the process of appointing a chartered accountant firm to carry out a special audit of the company, said an official.
Other low cap companies which are still under regulator’s scanner continued to rise shrugging off the regulator’s warnings.
“This may cause huge losses for the late-comer and over enthusiastic investors,” said an analyst at a brokerage firm, adding that some have been trying to fish out of the troubled water.
The market remained volatile over the last several months due to the ongoing political turmoil over the general election.
Amidst such chaotic situation, low cap companies dominated the trading, making their scrips overvalued.
A stock dealer, requesting not to be named, said if take a look at the price movements of scrips that are under investigation, you can see soon after enquiry made by the DSE, share prices of the scrips going up.
“That’s why investors swoop on those stocks to make a quick gain amid common perception that the regulator has nothing to do.”
Share prices of Rahima Food sharply rose more than 137%, Modern Dyeing 35% and JMI Syringe 23% in the last one month.
Earlier, the BSEC had opened a probe into the abnormal share price rise of CVO Petrochemical and other low cap companies, including Mithun Knitting, Tallu Spinning, JMI Syringes and Medical Devices, Alhaj Textiles, Bangas, Modern Dyeing and Anawar Galvanising.
The BSEC investigative team has already submitted their reports against those low cap companies’ unusual rise of share price. An official said the team found some institutions involved with price manipulation of the low cap companies.
For poor performance, the DSE has downgraded Rohima Food, Modern Dyeing and CVO Petrochemical to the Z-category with effect from yesterday.
Earlier, the DSE served a show-case notice on 16 low-cap companies to know the cause of the abnormal price hike. All the companies replied they have no price sensitive information.
DSE Chief Executive Officer Swapan Kumar Bala said: “Investors should be cautious about the unusual price hike of the low-cap companies.”
In every possible way, he said they were making the investors aware about those scrips that may upset their investment, he said.
Another analyst said price may increase by 100% in 10 days for different factors like growth prospect, low cap, low free-float and finally, if the buyers want.
“In a free market, I think, smarts win and fools die. So, if an investor is willing to give 100% higher price, regulator should do nothing,” he added.