Experts are sensing price manipulation as the gamblers target the small cap shares to manipulate prices
Prices of junk and low capital shares have continued to rise abnormally, whereas prices of quality stocks with large capital are declining gradually, denting investors confidence and making the stock markets volatile.
Experts are sensing price manipulation as the gamblers target the small cap shares to manipulate prices.
Analysing data of Dhaka Stock Exchange (DSE), Dhaka Tribune has found prices of quality stocks such as Grameenphone, British American Tobacco Bangladesh, Square Pharma and Brac Bank are falling.
On the other hand, share prices of fundamentally weak and low cap companies such as Kay & Que, Monno Jute Stafflers, Stylecraft Limited, Northern Jute Manufacturing Co and ICB Islamic Bank Limited rose significantly.
In addition, share trading under Z category has also seen spike in prices.
Why junk share prices skyrocket
Share prices in junk companies have been rising abnormally despite absence of price sensitive information and growth in earnings.
Former chairman of Bangladesh Securities and Exchanges Commission (BSEC) Faruq Ahmed Siddiqi has told Dhaka Tribune: “Manipulators usually target small cap stocks as their prices can be easily manipulated and the demand for their shares can be artificially inflated."
Price movement of junk shares
Dhaka Tribune has found that during the last month, per share price of Kay & Que (Bangladesh) Ltd went up from Tk179.3 to Tk234.6, with only Tk4 crore as the company's paid up capital.
Share price of Monno Jute Stafflers Limited increased from Tk1,258.3 to Tk1,777.6, with the company having only 2 crore as its paid up capital. Share price of Stylecraft Limited increased from Tk789.6 to Tk870.
Per share price of Northern Jute Manufacturing Co Ltd, presently a “Z” category company in Dhaka Stock Exchange, increased from Tk1,179 to Tk1,268. Share price of Progressive Life insurance went up from Tk80.5 to Tk90.1 in last week. ICB Islamic Bank Limited’s share price rose 9.7% on Thursday.
“Z” category shares have been rising in the same pace for the last few days against the fall of the blue-chip shares.
Reasons for price fall of quality stocks
“In recent trading session, share prices of Grameenphone (GP) went down as the company is going through critical time over unpaid audit claims. This is a reason, which dragged down the share prices of GP,” Abu Ahmed, an honorary professor at Dhaka University's economics department, told Dhaka Tribune.
On the other hand, prices of some companies might have seen downtrend due to new tax measures in the current budget, said the economist.
Ahmed also blamed absence of institutional investors in the market, who make decision professionally.
Price movement of quality stocks
Large cap stocks like Grameenphone, British American Tobacco Bangladesh, Square Pharma and Brac Bank are pushing the market down, leading to negative closure of the prime index of DSE.
Last month, share price of DSE’s highest market capital company Grameenphone fell from Tk322 to Tk195. Another big cap company British American Tobacco Bangladesh's share price fell from Tk1,227 to Tk1,172. Per share price of Square Pharma declined from Tk251 to Tk246.
Brac Bank fell from Tk62 to Tk57 and share price of United Power Generation & Distribution Company Limited stood Tk388.7, which was Tk410.8 on August 22.
Investors are urged to be cautious
“Rise of share prices without any prices sensitive information or development financial activity is not a good sign for the stock markets as well as the investors,” Policy Research Institute (PRI) Executive Director Ahsan H Mansur told Dhaka Tribune.
An investors should invest based on the company's financial performance and stay away from the junk stocks and rumour-based trading, which would render investment risky, said Mansur.
He also urged the regulator to strengthen surveillance to prevent price manipulations and protect investors rights.