Free fall in stock prices for months now has sent at least 47 companies below their face value of Tk 10 a share in the prime bourse, exposing investors to severe financial losses in a wobbly capital market.
The shares in red include bank, insurance, financial institution, pharmaceutical, textile, engineering and aviation sectors.
Of the ill-fated stocks, 18 companies were traded below Tk 5 at Dhaka Stock Exchange (DSE) yesterday.
Of the companies, 10 belong to textile sector, three are from financial institution, one from bank category, two from Pharmaceutical sector and one each belongs to engineering and aviation sectors.
The highest share price declining company being the United Airways (BD) Limited closed at Tk1.5 yesterday.
Speaking to Dhaka Tribune, stock market analysts said investors were unwilling to invest in these companies due to their lower returns, bad reputations
Besides, many companies were long closed and they did not have any financial abilities to declare dividends, leading to shares of these companies being undervalued.
They suggest regulator to become serious before giving initial public offerings (IPOs) approval to such companies, particularly low cap ones.
DSE Brokers' Association (DBA) President Shakil Rizvi told Dhaka Tribune, “The stock market has been going through a downtrend in the last couple of months, which may have led to lower prices of many stocks.”
However, that did not mean that they were junk shares and one could avail the opportunity of buying them at lower prices for the future, added Shakil.
Requesting anonymity, a stock broker said the investors' confidence in financial institutions and textile sector were very low due to the huge bad loans in the banking sector and poor export growth in apparel sector.
As of June, the total bad loans in the banking sector accounted for 11.69% of the total disbursed loans of Tk9,62,077.26 crore, according to the latest Bangladesh Bank data.
Besides, prices of yarn fell drastically in the local market due to multiple reasons, including currency devaluation and a buoyant grey market, leaving yarn manufacturers in a dire situation.
Talking to Dhaka Tribune, yarn manufactures blamed the devaluation of Taka against the US dollar, misuse of bonded warehouse facility, smuggled yarn, and cheap Indian yarn that was often imported through trade mis invoicing for the present situation.
Ten textile companies out of 55 in the sector being traded below Tk5 are: C & A Textiles, Dacca Dyeing & Manufacturing, Delta Spinners, Familytex, Generation Next Fashions, Maksons Spinning, R.N. Spinning, Zahintex Industries, Tallu Spinning, and Tung Hai Knitting & Dyeing Limited.
Four banks and financial institutions are: ICB Islamic Bank, Bangladesh Industrial Finance, Fareast Finance, and First Finance Limited.
Appollo Ispat Complex Limited was the only company that traded below Tk 5 in the engineering category. The company's share price declined for different periods and finally closed at Tk 4.9 yesterday.
The remaining two companies, which were traded below Tk5 are Keya Cosmetics and Beximco Synthetics Limited. The companies per share price closed at Tk 3.9 and at Tk3.9, respectively.
Stock market analyst and honorary professor at Dhaka University’s economics department Abu Ahmed told Dhaka Tribune that most of the listed companies were suffering from lack of good governance. Companies’ financial statement made by false information and sponsor directors often trade shares anonymously, violating securities laws, he added.
“They tend to make false financial reports. In this case, general investors will not invest in capital market,” he said.
Abu Ahmed also said that if the stock exchanges being the primary regulators, along with the BSEC were serious and vigilant, such a grave situation in the market would not have happened.
Others 29 companies traded below face value of Tk 10 are: Alif Manufacturing Company, Alltex Industries, Evince Textiles, Metro Spinning, Mozaffar Hossain Spinning, Mithun Knitting, Nurani Dyeing, Regent Textile and Zaheen Spinning Limited. The companies are listed in textile sector on DSE.
Bank and financial institutions sector companies are: AB Bank, First Security Islami Bank, IFIC Bank, National Bank, Standard Bank Limited. FAS Finance, International Leasing, Premier Leasing, Prime Finance and Union Capital Limited.
Others companies traded below face value are Golden Son, Olympic Accessories, Yeakin Polymer, Central Pharmaceuticals, Far Chemical Industries, Bangladesh Services, Khan Brothers PP Woven Bag Industries, National Feed Mill, Meghna Pet Industries and Fu-Wang Ceramic Industries Limited.
