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Five junk stocks keep rising

Imam Button jumps 46pc in a month sans PSI

FE REPORT | June 13, 2022 00:00:00

Prices of five junk stocks are rising 'abnormally' on the Dhaka Stock Exchange (DSE) despite these firms are incurring huge losses and not giving dividends for a long time.

Junk stocks have also frequently featured on the top gainers' list in the recent weeks.

A company's stocks are termed as junk when its commercial production is shut for six months in a row, fail to arrange annual general meetings on time or fail to provide dividends to shareholders.

Prices of five junk stocks -Imam Button Industries, Dulamia Cotton Spinning Mills, Meghna Condensed Milk, Meghna Pet Industries and C&A Textile-- are rising 'unusually' in the falling market.

In the last one month, share price of Imam Button jumped 46 per cent or Tk 28.50 each to close at Tk 90.40 on Sunday.

The 'Z' category company's share price more than doubled in the last three months despite the company incurred losses and not giving dividends for a decade.

Imam Button failed to pay dividend since 2011. In 2010, the company disbursed a 10 per cent stock dividend. Its production has been suspended since April, 2020.

The company has incurred a loss of Tk 3.93 million in nine months for July 2019-March 2020 as against loss of Tk 2.23 million in the same period of the previous year, according to its latest published data.

Earlier, the company replied to a DSE query that it was unable to earn sufficient revenue, for which it has been making losses since 2011.

"The company is unable to utilize their production capacity at satisfactory level due to the pandemic".

Despite suspension of production and failing to declare dividends, the company's share price did not stop rising.

Even its share price rose 3.91 per cent further on Sunday although the overall market fell.

Share price of Dulamia Cotton also rose 43 per cent or Tk 21.50 each in the last one month and closed at Tk 71.90 on Sunday. The junk stock also jumped 9.91 per cent on Sunday in the bearish market.

Meghna Condensed Milk's stock price, another junk issue, also soared 29 per cent in the last one month to close at Tk 23.40 on Sunday. Its share price also rose 6.85 per cent on Sunday.

Share price of Meghna Pet Industries, another junk stock, also rose 27 per cent in the last one month to close at Tk 30 on Sunday. Its share price soared 4.17 per cent on Sunday.

Another junk stock -- C&A Textile -- also rose 23 per cent in a month to close at Tk 10.20 on Sunday. Its share also soared 2.0 per cent on Sunday despite many fundamentally sound stocks faceing corrections.

Market analysts blamed price manipulation due to a small volume of shares being behind the artificial crisis.

"These low-profile companies' paid-up capitals are very low, making target for gamblers seeking to manipulate trading," said a merchant banker preferring anonymity.

Some companies with low performance records also made their way into the top gainers' list of the DSE frequently, riding on a rumour that the investors are putting money in the securities, said a leading broker.

"The influential investors by disseminating rumours are trying to manipulate the prices of shares of many low-profile companies to make quick-profit," he said.

He said the investors are chasing these stocks without conducting any proper analysis, as they see continuous rise in values.

"If these stocks face corrections, general investors will be the ultimate losers," he said adding that the investors should be careful about buying junk stocks in order to avert any misfortune.

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