Rumours and speculations have recently dominating the country’s capital market, putting investment at risk particularly for retailers and ignoring warnings by the securities regulators to take stern action against the rumour mongers.
The market was abuzz with a handful of rumours like the government to start buying of shares of state-owned enterprises, the government to keep the market up ahead of general election and prices of some specific shares to go up.
“These all (rumours) are fake and baseless,” Saifur Rahman, an executive director and a spokesperson of the Bangladesh Securities and Exchange Commission (BSEC) told the Dhaka Tribune yesterday. “It’s so tough to find out the roots of rumours…but, we continue to make our all out efforts to bring the culprits to book.”
Based on rumour that the government will purchase shares to hold its majority in the state enterprises, share prices of Power Grid, DESCO, Meghna Petroleum, Titas Gas and Jamuna Oil rose to substantially high.
Likewise, many other listed scrips also behaved irrationally over the months, ignoring securities rules and fundamentals, pushing the market to an unhealthy condition.
Bangladesh Submarine Cable Company Ltd stock prices rose to Tk335, an increase of 45% from Tk231 in the last one month on the news that the company planned to export bandwidth to the north-eastern states of India.
“Its earnings will not change overnight, even if this news is true. And share price rises in such a way that it exceeds the company’s fundamentals,” said a stock broker.
A senior executive in Dhaka Stock Exchange said, “In a good number of cases, we’ve observed that share price movement is driven by rumours, but not by fundamentals.”
Accordingly, in most of the cases, the investors are suffering from undesirable losses, he said.
Yawer Sayeed, a market expert, said setting up research wings in every merchant banks are the demand of the hour to make the investors investment safe as the market size is expanding. “But it is quite difficult to tackle the rumour-based investment.”
Some merchant banks have launched awareness building programme over the years. But the initiative leaves visibly no impact on the stock markets as the investments made by the investors, particularly retailers, on the basis of rumour.
A fund manager said rumour and speculation are the part and parcel of the stock markets, but their magnitude is a bit high in the country’s stock markets as most of the investors, particularly retailers, are prone to rumour because of their poor knowledge about stock markets.
Not being afraid of rumour-based investment, Abul Kalam, a small investor, said: “Always remain in touch with the market, if you want to make quick gain. No matter your investment is driven by rumour or speculation.”
Referring to a SMS that says share prices of Beximco and GBB Power would generate high return, SEC spokesperson said, “We are yet to capture the rumour mongers even after a strong drive for six months.”
Though the market watchdog formed a two-member committee in December last year to trace the manipulators, the panel is yet to make any headway as the culprits used mobile phone SIMs registered with fake documents, he said.
In its directive in September last year, the BSEC warned of legal actions against spreading rumours or price sensitive information of listed companies through different social media networks, including Facebook.
The BSEC also cautioned investors against gathering information from the social media or any unconfirmed source as it may cause financial losses to investors.
