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Dhaka, July 23:
The ongoing recovery in Bangladesh’s stock market is being overshadowed by growing concerns over unusual price rallies in non-operational and financially distressed companies, raising red flags about possible manipulation despite regulatory oversight.

While blue-chip stocks have underpinned a six-session rally on the Dhaka Stock Exchange (DSE), a significant number of junk stocks—mostly from small-cap, loss-making firms with halted operations—have also seen their prices surge, driven largely by speculative trading.

These firms, many of which have failed to declare dividends for years, continue to post accumulated losses with no visible signs of operational recovery. Still, their stocks are climbing rapidly, raising questions among analysts and regulators.

To verify the operational status of some of these companies, DSE inspection teams conducted surprise visits this week to Aramit Cement, Ratanpur Steel Re-Rolling Mills, and Nurani Dyeing, all of which were found to have suspended operations. Despite this, their share prices rose between 10% and 23% over the past month.

“This kind of price movement is not possible without manipulation,” said Md Sajedul Islam, Managing Director of Shyamol Equity Management. “A stock rallies when a specific group drives up the price, and general investors, fearing they’ll miss out, jump in—only to be left holding overvalued shares.”

He warned that manipulators often use these price spikes to exit their positions, offloading junk stocks to unsuspecting retail investors.

Islam emphasized the need to empower stock exchanges to delist non-compliant or non-operational firms, which he said would curb speculative trading and protect market integrity.

A senior merchant banker, speaking on condition of anonymity, echoed similar concerns. “Retail investors have been chasing these stocks in recent weeks, lured by the potential of high returns from low-priced shares, particularly as the broader market gains momentum.”

In an earlier effort to flag underperforming companies, the DSE in September 2023 identified 14 firms that had either halted operations or failed to meet disclosure requirements. Since then, the bourse has conducted inspections at more than 10 companies, many of which were found to be closed.

One such company, Khulna Printing & Packaging, has not been operational since October 2021. It recorded accumulated losses of Tk 960 million through FY22 and has not declared any dividend in four fiscal years, aside from a nominal 0.25% payout in FY20. Yet, its share price jumped 25% over the past month, and previously spiked from Tk 7.2 to Tk 33.2 in January without any price-sensitive disclosures.

Similar speculative gains were recorded in:

Dulamia Cotton, up 42% in a month despite sustained losses,

Meghna Pet Industries, up 32%, despite negative retained earnings and no recovery trajectory.

Despite these irregularities, the market continued its upward momentum. On Tuesday, the DSEX, the key index of the DSE, rose 51 points or 0.97% to close at 5,270, pushing its six-session gain to 209 points and lifting total market capitalisation by Tk 225 billion.

The DS30, which tracks top-performing large-cap stocks, gained 33 points to 2,030, while the DSES, which tracks Shariah-compliant stocks, added 15 points to reach 1,161.

However, daily turnover dipped by 16% to Tk 7.22 billion, down from Monday’s 10-month high.

The Chittagong Stock Exchange (CSE) also closed higher, with the CASPI rising 81 points to 14,654 and the CSCX climbing 58 points to 8,956.