Newly-labeled Z stocks plunge on DSE

All 22 stocks newly labeled as Z category securities lost value on the Dhaka Stock Exchange (DSE) on Sunday.
Market insiders believe the stock market watchdog has reduced the scope of manipulation by downgrading non-performing shares to junk category.
Since Z category stocks do not qualify for margin loans, investors need cash to trade in them.
Four out of these 22 companies have been shifted to Z category for being out of operation for more than six months.
Three others have lost their status for not holding annual general meetings and the remaining 15 organisations have a negative balance of retained earnings exceeding paid-up capital.
Ershad Hossain, chief executive officer of City Bank Capital, told the FE that because of the transfer to Z category these shares would not be able to get liquidity. Moreover, the trade settlement cycle for them increased to T+3 from T+2.
On Sunday, more than half of the 22 stocks experienced corrections by more than 9 per cent.
By placing the shares in the junk category, the stock market regulator also gave investors a signal about the companies' health.
Out of the 22, three have been moved from A category and the remaining 19 from 'B' category.
Mr Hossain said the Bangladesh Securities and Exchange Commission might try to improve the situation of the companies by attracting good investment.
"There are few examples of that happening in our country."
Tanzim Alamgir, CEO of UCB Investment, praised the move of the BSEC and said any weak companies should be prevented from listing in the future.

[email protected]