Written by The Banking Post
A rally in junk and low-performing stocks drove the Dhaka Stock Exchange (DSE) higher last week, raising fresh concerns about speculation and risks for small investors.
Eight of the top ten gainers came from the “B” and “Z” categories – companies with poor track records, no dividends, or even shuttered operations – according to the DSE weekly report.
Information Service Network led the pack, soaring 47% to Tk72.60, despite posting losses in the first nine months of FY25 and having no calculable P/E ratio. Other big movers included Meghna Cement (up 28%), Bangladesh Autocars (26%) – trading at an eye-watering P/E of 926 – and junk scrips such as Shyampur Sugar (25%) and Zeal Bangla Sugar (23%).
Market analysts say these rallies are disconnected from company fundamentals.
“When junk or weak-category stocks dominate, it signals excessive speculation. Many of these firms have no earnings, no dividends, or even suspended operations. Retail investors often get trapped chasing quick gains,” cautioned a senior market analyst.
Another equity strategist pointed to Bangladesh Autocars’ P/E ratio as “a red flag,” warning that such pricing is unsustainable.
In response to growing risks, the Bangladesh Securities and Exchange Commission (BSEC) has proposed banning margin loans for B- and Z-category stocks, with draft rules released on 19 August for public feedback.
Despite the speculative surge, the broader market gained ground. The DSEX benchmark index rose 24.7 points, or 0.5%, to 5,375, while average daily turnover jumped 31.6% to Tk907 crore, crossing Tk1,000 crore in one session. Market breadth stayed positive with 241 gainers against 129 losers out of 394 traded issues.
Investor activity was strongest in pharmaceuticals (17.7% of turnover), followed by textiles (11.6%) and banks (11.5%). The paper sector led sectoral gains, while mutual funds lagged. Bangladesh Shipping Corporation, Beximco Pharma, Orion Infusion, City Bank, and Beach Hatchery topped the turnover chart, reflecting strong institutional and retail participation.
On the flip side, troubled banks and non-bank financial institutions dragged down the market. Exim Bank was the week’s worst performer, followed by First Security Islami Bank, Social Islami Bank, Premier Leasing, Phoenix Finance, and GSP Finance.
EBL Securities noted that the benchmark rebounded after a short correction, supported by selective large-cap buying. However, profit-taking in bank stocks and uncertainties over new margin rules stirred volatility.
Insiders warn that junk rallies, while eye-catching, rarely last.
“Sustained growth depends on large-cap and fundamentally strong stocks. Junk rallies might excite the crowd, but history shows they hurt retail investors in the end,” said a former DSE director.
With elections approaching in early 2026 and macroeconomic conditions improving, experts expect stronger fundamentals to drive the market. For now, however, the dominance of junk stocks underscores the speculative nature of recent gains.
