Progressive Life Insurance Company, a Z-category stock, has been flying high on the Dhaka Stock Exchange (DSE), posting a staggering 71 per cent increase in its share price over the past month.
The loss-making life insurer's stock soared to Tk 62.30 on Thursday, up from Tk 36.4 on February 23, despite a lack of apparent justification for investor enthusiasm.
The life insurer even failed to declare a dividend for the past five years. The company declared a 10 per cent stock dividend last in 2019.
Moreover, no financial data was found after September 2020 and the life insurer has not held an annual general meeting since 2020.
Still, the stock has repeatedly topped the gainers' lists at a time when investors are shying away from many fundamentally sound stocks.
Such an unusual price movement of the company's shares prompted the prime bourse to serve a show-cause notice to the company authority last week, enquiring about the reasons behind that.
In response, the company said there was no undisclosed price-sensitive information for the recent price hike.
Even after the show-cause notice was served, its stock price did not stop rising, bringing into question investors' preference for such junk stocks.
In July 2023, the securities regulator downgraded the company to "Z" category from the "A" category for its failure to hold AGMs on time.
Analysts said that speculative trading and short-term profit motive might have fuelled the junk stock's price jump, as no major changes in fundamentals were observed in the company.
The price manipulation was the major reason behind such an "abnormal" price surge of loss-making companies, said a stockbroker.
"The stock price hike of the life insurer is unusual considering the current status," he said.
The low-performing stocks have been a common trend in recent times as gamblers pushed up the prices of some junk shares through serial trading and then spread rumours among general investors.
Some investors want to become rich overnight, so they fall into the trap of gamblers, he added.
The investors are chasing these stocks without conducting any proper analysis, as they see continuous rise in values.
Some institutional investors are also betting on speculative stocks like individuals amid a lack of investable stocks, which is not a good sign for the market.
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