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Unscrupulous traders still control share market

Published : 03 Sep 2021 09:37 PM

Although the country's capital market is better than at any time in the past, it is still in the hands of the unscrupulous traders, experts said.

The stocks witnessed upward trend for a long time due to positive regulatory initiatives to put fresh funds on stocks, they said adding that, investor confidence has begun to return after the new commission took charge, and its various positive steps.

People’s interest in the capital market has increased due to tightening investment in savings certificates and lower interest rates on bank deposits, they said.

Now the capital market becomes a good place for investments, but the unscrupulous traders are still active on the market, they mentioned.

Unscrupulous traders are investing in shares of low capital companies and in companies which are stopping production rather than good companies, they added.

As a result, many general investors also are investing in these risky companies and lose their investments, they mentioned.

The country's capital market is behaving irrationally as some unscrupulous traders are still alive, and in control of the market, they informed.

Professor Abu Ahmed, capital market analyst and an eminent economist, told Bangladesh Post, “The country's capital market is better than ever. This opportunity has been exploited by the manipulation cycle. They are stopping production and investing in shares of low capital companies rather than good companies. Through serial trading, the shares of these companies are increasing in price, then they are selling the shares and making money. And ordinary investors are investing in the shares of these companies in the hope of making huge profits.”

Around 70-80 percent of investors are losing out by investing in these risky companies, he said adding that, only 20-30 percent of investors are benefiting.

As a result, the regulatory body should take legal action against the manipulation cycle to protect the market and investors.

“The government should immediately prepare the ground quite well to bring in some good companies, in order to undertake a drive to develop a long-term financing capital market,” Ahmed mentioned.

He suggested investing in companies which are continuing to make good profits over the last few years with business-successful organizations, and efficient management authorities, when considering investing in the capital market.

However, the share price of Rahima Food has been rising for more than two months.

Senior officials of the Dhaka Stock Exchange said the rise in the company's share price is unusual.

The DSE warned investors on Monday after the rise in prices of two months, Rahima Food's share price had risen abnormally for no reason.

The DSE said a notice was sent to the company on August 29 to explain the reason for the unusual rise in share price. In response, the company's authorities said there was no undisclosed price-sensitive information for the unusual rise in the share price recently.

A review of the data shows that on June 27, the company's share price was Tk 210 per share, which increased a lot and stood at Tk 362.80 at the end of the transaction on 31 August.

In other words, the company's share price has risen by Tk 143.10 in two months.

The DSE website does not provide information on when the company last paid dividends to investors.

However, the company has released its financial report for the first nine months of the fiscal year 2020-21 (July 2020 to March 2021).

According to the report, the company has earned only 6 paise per share during the time.

On the other hand, shares of Paper Processing and Packaging Limited started trading in the capital market on June 13 this year from the Over the Counter (OTC) market.

On the day of the transaction, the share price of the company was Tk 17.60. On Tuesday, the share price of Paper Processing and Packaging increased by around 932 percent or Tk 164.1 to stand at Tk 181.70.

Experts said this price has been increased through complete manipulation, the cycle of selling shares by increasing the price, and some ordinary investors are buying those shares without realizing it.

In addition to the two small-cap companies, unscrupulous traders have increased a lot of companies’ shares including Apollo Steel, Anwara Galvanizing Limited, Tamizuddin Textile, Genex and so on by circulating rumors.

Market insiders said the scars of the 2010 landslide have not yet healed. After eleven years, the capital market is returning to the upward trend.

The stocks witnessed upward trend continuing since 13 April this year and the DSEX, prime index of Dhaka Stock Exchange (DSE), increased by 1610.75 or 30 percent to stand at 6869.25 points on Tuesday which is the highest of the history.

On this occasion, the unscrupulous traders once again spread rumors that the ownership of the company is changing, the company is returning to production and foreign companies are investing, they mentioned.

They make it clear to investors that the good company is buying the loss-making company, they said adding that, as a result, the company's profit will increase. That is why, the share price continues to rise of those companies.

When the share price goes up, this cycle picks up money by selling shares, and ordinary investors are tempted to buy shares of these companies.

In this way, many are being harmed anew, they informed.

Mohammad Rezaul Karim, executive director and spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), said, “Some evil people want to do mischief in the market. They want to obscure the stable capital market. We are working against this cycle.”

He said, "I have formed a committee on behalf of BSEC a few days ago. The committee is looking into whether the share prices of nine companies have risen at an unusual rate and whether the company has withheld any price sensitive information. It is also being checked whether the financial report has been manipulated or whether the company's earnings per share (EPS) has been inflated.

The companies that are under BSEC scanner are: Emerald Oil, Anwar Galvanizing, GBB Power, Bangladesh National Insurance, National Feed Mills, Paper Processing and Packaging, Dacca Dyeing, Fu-Wang Ceramic, and Beacon Pharmaceuticals.

Rezaul Karim said, “It is not in production. The head office of the company is also closed. Even then, the share price is rising. There must be something behind it. We are watching these closely.”