Stocks fall on profit booking
The country’s stocks dropped yesterday due to a profit booking tendency among investors while the market turnover rose.
The DSEX, the benchmark index of Dhaka Stock Exchange (DSE), dropped 23 points, or 0.37 per cent to 6,196.57.
The index reached a three-and-a-half-year high on Monday with many stocks advancing by 10 to 15 per cent in the last few days, according to a merchant banker.
“So investors took in the profit now,” he said, adding that the profit booking tendency improves the market in the long term.
That is why investors should not fear the fall and instead should invest based on the companies' performances, he said.
Turnover, another important indicator of the market, rose 15 per cent to Tk 1,789 crore whereas it was Tk 1,551 crore a day earlier.
Although the market has been on a rising trend for the last few months, many junk stocks and low profit-making companies have risen day by day mainly due to rumour-based trading, said a stock broker preferring anonymity.
“These stocks are creating a balloon in the market that could burst at any time and so investors need to be cautious,” he added.
Since companies with good performance records survive even at the toughest of times, investors should seek out companies based on their fundamentals, he said.
“If they invest in well-performing companies, investors remain unscathed even if the market falls because these companies provide good dividends,” said the broker.
At the DSE, 142 stocks advanced, 244 declined and eight remained unchanged.
Fareast Finance & Investment topped the gainers' list, rising 10 per cent, followed by Paper Processing & Packaging, Sonali Life Insurance, FAS Finance & Investment, and Generation Next Fashions.
Stock of Beximco were traded the most with Tk 93 crore worth of shares changing hands, followed by LankaBangla Finance, Aman Feed, Keya Cosmetics, and ML Dyeing.
Malek Spinning Mills shed the most, falling 7.12 per cent, followed by Sonargaon Textiles, Dhaka Insurance, Metro Spinning, and Sonali Paper & Board Mills.
The port city bourse also fell yesterday. The CASPI, the general index of Chittagong Stock Exchange (CSE), nosedived 79 points, or 0.44 per cent, to 17,956.
Among 312 stocks to undergo trade, 134 advanced, 166 dropped and 12 remained unchanged.
The CSE announced that investors can now safely and reliably conduct trading activities through the bourse’s Internet Trading Service (ITS) and mobile application “CHITRA”, according to a press release issued yesterday.
Amidst the ongoing Covid-19 pandemic and subsequent lockdowns, local investors can comfortably trade digitally through websites, it said.
The Bangladesh Securities and Exchange Commission (BSEC) in a directive on June 30 instructed both the DSE and CSE to promote their digital platforms to enable investors to trade from home instead of being physically present at their respective brokers' offices.
“The CSE’s state of art ITS facility and android mobile application CHITRA can provide uninterrupted trading facilities for investors. These digital channels can ensure faster and real time online trading facility,” it added.
The DSE mobile app is also running for investors to conduct trade online.
Malek Spinning share price skyrockets ‘unusually’ before investment disclosure
The DSE wrote to Malek Spinning on Tuesday, ordering the company to explain the eye-popping surge in prices and volume. Then the company came up with disclosure of Tk 2.13 billion investment plan, raising the prices further on the prime bourse.
Questions abound as the stock surged 132 percent over the past two months.
The company offered an explanation to the DSE, saying that it did not have any “material information” for disclosure to the shareholders and regulatory agencies, before holding the board meeting on Tuesday.
Data show the stock was oversubscribed as the 14-day relative strength index shot past 70, indicating ominous signs.
Abdul Matin Patwary, acting managing director of Dhaka Stock Exchange, put it simply: “Malek Spinning has broken the rules by not disclosing the investment at the proper time.”
Citing the rules, Patwary said the company should have informed the DSE within half an hour into taking the decision.
The DSE has informed Bangladesh Securities and Exchange Commission about the issue and the company will face legal action, he said.
Syed Saiful Haque, company secretary of Malek Spinning, said they did not know why the price of their share is shooting up.
“We took the decision (on the investment) yesterday (Tuesday). We informed (the DSE) about it. Now we can’t say why the share price is rising this way.”
On Wednesday, Malek Spinning shares were traded at Tk 31.6 per issue, rising by Tk 8.9 in the past five days, and by Tk 18 from Tk 13.6 on Apr 28. It means the company’s share saw a 132.35 percent rise in one month and 25 days.
Most of the investors did not sell off their shares on Wednesday, hoping for a further hike. Over 1.3 million shares of the company changed hands in 290 transactions.
Out of the 193.6 million shares of the company, sponsor directors own 47.34 percent.
The share’s Relative Strength Index or RSI has crossed 70, a sign that indicates investors should be cautious while buying it.
With the new investment, the company said, it will set up a new plant and pay expenses for balancing, modernisation, rehabilitation and expansion of the old one.
The new plant will be on the premises of the old one in Mymensingh’s Bhaluka.
It expects a 60 percent rise in productivity and revenue with the new investment. Currently, it can produce 12.6 million kg of yarn annually.
The investment in the old plant will also help the company raise its profit, Malek Spinning said.
The new investment will come from its own funds and credits from banks and other sources.
Listed in 2010, the company’s share is traded in category A.
In the year ending on Jun 30, 2020, the company reported a loss of Tk 326.1 million.
In the nine months until March this year, its Earnings Per Share was Tk 1.98.
With a market capital of nearly Tk 5.6 billion and paid-up capital of Tk 1.93 billion, the company’s reserves stand over Tk 4.86 billion.
4 new pawns for stock gamblers
Four small capital-based companies which have returned from the over-the-counter (OTC) market have been turned into new pawns by gamblers in Dhaka Stock Exchange (DSE).
The stock market regulator allowed Bangladesh Monospool Paper Manufacturing Company, Paper Processing and Packaging, Tamijuddin Textile Mills and Monno Fabrics to return to the main market and their trading started a week ago.
Soon after getting listed in the main board, the stocks started taking abnormal leaps although their financial performance is not that better than many other listed companies of the same price.
Furthermore, when the bourse wanted to know whether they had any reason for it, they informed to have no undisclosed price sensitive information.
The Monospool’s stocks rose 134 per cent to Tk 129 in a span of eight trading days.
Meanwhile, the Processing’s stocks advanced 133 per cent, the Tamijuddin 132 per cent and the Monno 132 per cent.
Market analysts believe the basis of the rise are solely rumours and gamblers were picking such companies as it was easy to manipulate those with a low paid-up capital.
The Monospool has a paid-up capital of Tk 3.2 crore, the Processing Tk 3.73 crore and the Tamijuddin Tk 30 crore.
The sole exception is the Monno, whose paid-up capital is Tk 115 crore.
Since there were small and medium enterprise (SME) boards at both the Dhaka and Chattogram bourses, the low paid-up capital-based companies could have been allowed there so as to prevent gamblers from playing with those.
So, stock market analysts were curious as to why the regulator decided to allow the four at the main board.
Their rising patterns were also not in tune with their performance.
The Monno provided no dividends for shareholders in recent years, showed the DSE data.
Its earnings per share (EPS) was Tk 0.04 in the nine months period of the current fiscal year (July of 2020 to March of 2021) as against Tk 0.06 in the same period of the previous year.
Meanwhile, the Monospool provided 9 per cent cash dividend and its EPS dropped 94 per cent year-on-year to Tk 0.28 from Tk 5.06.
Cash dividend of the Processing was 11 per cent for last year while its EPS was downed 87 per cent year-on-year to Tk 0.44 from Tk 3.53.
The Tamijuddin provided 10 per cent cash dividend. Its EPS rose to Tk 0.98 from Tk 0.81.
The EPS of three dropped, which was over 80 per cent for two, while that of one was less than Tk 1, explained a top official of an asset management company preferring anonymity.
A stock price surge of over 130 per cent is not financially logical, he said, adding, “This is totally absurd.”
The regulator should monitor them, he said, adding that their inclusion helped some people get new items to gamble with.
Some of the returnees could be sent to the SME board and the rest kept at the main board, he added.