The share prices of some low-performing non-bank financial institutions (NBFIs) dominated the gainers' list on the Dhaka Stock Exchange (DSE) on Wednesday - following news that the securities regulator was going to restructure their boards.
Professor Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), in a recent meeting said they took a move to restructure the boards of some NBFIs, which had been struggling to make profit for several years.
The day's top five gainers were NBFIs, with Fareast Finance and Investment topped the gainers' list - rising 10 per cent to close at Tk 6.60 each.
Bangladesh Industrial Finance Company (BIFC), Union Capital, and International Leasing and Financial Services (ILFSL) were also in the top gainers' list, rising 9.74 per cent, 9.59 per cent, and 8.93 per cent respectively.
The share price of BIFC - a junk stock - was soaring 'abnormally' although the company incurred huge losses and had not been giving dividends for the past eight years.
The scam-hit financial institution's share jumped 88 per cent in a month to close at Tk 12.40 on Wednesday. It was the highest closing price in more than two years.
The share price of the loss-making NBFI, listed with the DSE in 2006, rose 9.74 per cent further on Wednesday.
The company's shares started to rise after the news that Prashanta Kumar (PK) Halder was arrested in India in May. He embezzled a huge amount of money from four NBFIs, including BIFC, by purchasing shares anonymously.
PK Halder also looted money from three other listed NBFIs - People's Leasing, International Leasing, and FAS Finance. However, share trading of People's Leasing had been suspended since July 2019.
The entities that PK Halder controlled had been struggling for survival for several years, as those were hit heavily by default loans as well as lack of capital and failed to repay investors.
PK Halder, the former managing director and CEO of NRB Global Bank, was charged with misappropriations of more than Tk 35 billion, as per the Bangladesh Bank investigation.
BIFC reported an accumulated loss of Tk 11.05 billion as on 31 December 2019, and 95 per cent of its investment was classified, as per the latest published financial statement. The company disbursed 5.0 per cent stock dividend last in 2013.
Despite weak financial condition, BIFC's unusual price hike prompted the DSE to serve notice on the company several times during the last few months.
The company, however, replied: "There is no undisclosed price sensitive information behind the recent unusual price hike of the company."
A company's stocks are termed as junk, when its commercial production is shut for six months in a row, or it fails to arrange annual general meetings on time, or fails to provide dividends to shareholders.
A leading merchant banker, however, said the investors were taking a huge risk (by investing in the weak NBFIs), as restructuring of their boards could not guarantee profits for the companies.
"Some people were using the opportunity to spread rumours and make people buy those stocks."
The investors should be cautious to safeguard their investments, he added.
Some companies with low performance records also stepped into the top gainers' list of the DSE frequently, riding on a rumour that the investors were putting money in the securities.
"The influential investors, by disseminating rumours, are trying to manipulate the share prices of many companies to make some quick profit," said an analyst at a leading brokerage firm.
He noted that the investors were chasing those stocks without conducting proper analysis, as they saw continuous rise in their values.
"If these stocks face corrections, general investors will be the ultimate losers, which will dent their confidence," he added.
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