In the aftermath of the regulator’s action, the prices of shares of most of these companies have started to fall
Bangladesh Securities and Exchange Commission (BSEC) is taking tough action to stop the unusual rise of small-cap companies shares especially the companies that are not in full-fledged production.
In protecting investors’ rights and curbing price manipulation, the regulator has suspended trade at the bourses and launched investigation against these companies.
In the aftermath of the regulator’s action, the prices of shares of most of these companies have started to fall.
“The Commission is always working to stop any irregularities and protect the interests of investors. We believe that will be able to identify the people involved in this and action will be taken against them,” said BSEC Executive Director and spokesperson Md Saifur Rahman.
In the last six months, share prices of some companies showed continuous rise but these companies are not performing well and being traded under the A, B and Z category, Small cap shares have been seen to rise sharply in the last couple of months.
Stock market stakeholders say a syndicate is controlling the shares of small capital companies. General investors are being affected while the syndicate is making great profits.
Speaking anonymously to the Dhaka Tribune, a Dhaka Stock Exchange (DSE) official said: “The share prices of these companies are increasing abnormally. This is due to the number of small size shares in the market. The syndicate takes advantage of this and makes large sums of money from the stock market through a small capital company.”
Policy Research Institute (PRI) Executive Director Ahsan H Mansur said: “On one hand, the regulatory body should be tougher against these schemes and stop the increase in unusual prices. On the other hand, people should invest carefully. They should stay away from investing in junk shares.”
On August 16, BSEC ordered the stock exchanges to suspend the trading of three companies.
The three companies are Monno Jute Stafflers Ltd, BD Auto Cars and Legacy Footwear. The companies have been suspended for 30 sessions.
The commission decided on the punitive measures after the watchdog detected anomalies in the trading of the companies’ shares.
Furthermore, the BSEC also decided that five other companies will be traded on the spot market for an unlimited period, due to irrational price hikes.
The five companies which were sent to the spot market are Monno Ceramics, Key&Que, Aziz Pipes, Style Craft and Dragon Sweater.
In addition, the stock market regulator decided to form an inquiry committee to investigate the abnormal price hikes of BD Autocars, and Legacy Footwear shares.
The committee, headed by BSEC Deputy Director Shamsur Rahman, was asked to submit its report within 30 working days.
The committee will investigate the reasons behind the unusual increase in the price of shares of these companies, and will look into possible insider trading, price manipulation, and securities violations, spokesperson Md Saifur Rahman told.
Stockholders of the capital market posit that the decision had a negative impact on the shares of these companies without suspended companies.
Earlier, on July 18, the Dhaka Stock Exchange (DSE) delisted Rahima Food Limited, and Modern Dyeing and Screen Printing Limited, as the share prices of the companies continued to surge abnormally despite the companies having been out of operation for a long period.
On August 6, the bourse also decided to take punitive measures against 15 more non-compliant and non-performing companies.
The companies are Meghna Pet Industries, ICB Islamic Bank, Dulamia Cotton Spinning Mills, Samata Leather Complex, Shyampur Sugar Mills, Zeal Bangla Sugar Mills, Imam Button Industries, Meghna Condensed Milk Industries, Kay & Que (Bangladesh), Savar Refractories, Beximco Synthetics, Jute Spinners Ltd, Shinepukur Ceramics, Sonargaon Textiles and Information Services Network Limited.