Some low-performing stocks have been flying high on the Dhaka Stock Exchange (DSE) in the last few months without any reason for investors to be keen on betting their money on those.
Most of these small-cap companies have not paid dividends for years due to losses and are now struggling to keep their production on.
While the lowest stock prices set by the stock market regulator have kept companies with strong earnings results unmoved for more than a year, a handful of stocks seem to have dominated the trading floor.
The stock price of Khulna Printing & Packaging, for example, more than doubled in the month to Monday though it had incurred losses for the past five consecutive years. Losses piled up to Tk 960 million until FY22.
It did not give any dividend to shareholders for the last three financial years. The last time it disbursed only 0.25 per cent cash dividend for FY20. The company has been non-operational since October 2021.
The Anti-Corruption Commission (ACC) filed a case against SM Amjad Hossain, managing director of Khulna Printing, in 2020. All of his bank accounts were frozen for allegations of corruption.
Despite all these facts, the stock continued to soar and rose 1.35 per cent further on Monday to Tk 30.10 from the day before.
The stock made it to the top gainers' list on several occasions during the month, securing an astounding 135 per cent rise on the DSE. There was no price-sensitive information to drive up the stock.
Listed in 2014, Khulna Printing has remained in the group of B category stocks.
The unusual price movement prompted the prime bourse to serve a show-cause notice to the company several times, but it has not provided any response.
Repeated phone calls by the FE correspondent to company secretary Md Milan Khan for comments were left unanswered.
Not only Khulna Printing but also Khan Brothers PP Woven Bag Industries, Central Pharma, Standard Ceramic, Shyampur Sugar Mills, Pacific Denims, and BD Thai Aluminum showed abnormal price jumps in the recent months.
Khan Brothers jumped 67 per cent on the DSE in the past one month at a time when the company has been suffering from a severe working capital shortage. It has been forced to subcontract work.
The company made losses for the last four years. The accumulated loss was Tk 47.74 million until the end of FY23.
Khan Brothers is among the 14 companies listed by the DSE for factory inspection, as, it says, the real scenario of some businesses should be exposed.
The bourse said it was going to identify the companies that were non-operational but refrained from informing investors about the status.
Company secretary Tapan Kumar Sarker himself expressed shock at the inexplicable price surge, saying they had no undisclosed price sensitive information
He said the company's business had been seriously affected by the pandemic when it did not receive any order from foreign buyers.
The management is now trying to continue operations partially to supply products to local businesses, added Mr Sarker.
Standard Ceramics, which has been in the red for the last two years, soared 31 per cent in a week. It took off from the floor a week ago, having suffered a loss of Tk 19.03 per share in FY23.
Shyampur Sugar Mills, one of the junk stocks that have recorded losses for more than a decade, rose 27 per cent on the DSE in the month through Monday.
The price surges of the companies, which are either loss-making or closed, are nothing but an outcome of manipulation.
The trading pattern of these small-cap stocks looks unusual and is mostly driven by manipulation, said Prof Abu Ahmed, a former chairman of economics department at the University of Dhaka.
Despite a lack of business growth, a company exhibits a rally in the stock market when a certain group of people influence the price while others join the rally not to miss out on the opportunity to make quick bucks, he said.
Investors have turned to junk stocks with hopes of higher returns from low investments, as well-performing stocks are not moving up the floor prices.
Having operations suspended for years, with no sign of recovery in the foreseeable future, Northern Jute Manufacturing traded at nearly Tk 200 each share on the DSE on Monday.
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