Hamid Fabrics share surges 67pc despite losses

Shares of Hamid Fabrics surged 67 per cent on the Dhaka Stock Exchange (DSE) yesterday even after reporting huge losses earlier on the day.

What is more, the fabrics-maker recommended lower cash dividends for general shareholders for the financial year of 2020-21.

Still, though, Hamid Fabrics saw its share value shoot up to Tk 30.60 yesterday from Tk 18.30 the day before, according to data from the DSE.

"The company's stock price surge was completely abnormal, but such abnormalities have been witnessed in the case of many other stocks as well," said Al-Amin, an associate professor of accounting and information systems at the University of Dhaka.

For example, the stocks of Fortune Shoes, Delta Life Insurance, NRB Commercial Bank, and Sonali Paper were clearly manipulated, but the Bangladesh Securities and Exchange (BSEC) is yet to take any action against those responsible for unknown reasons.

But since the market regulator has formed an investigation committee for these matters, some manipulators have become desperate, he said.

"The regulator should maintain good governance for all," Al-Amin added.

For Hamid Fabrics to witness such a single-day increase in value seems odd as the company delivered a lot of bad news about its performance earlier the same day, said a senior official of a brokerage house, preferring anonymity.

Hamid Fabrics reported that it incurred losses of Tk 16 crore in 2020-21 after logging profits of just Tk 3.8 crore the previous year.

The company's revenue has significantly decreased in the last fiscal year mainly due to the economic impacts of Covid-19, it said in a regulatory filing.

The reduced profitability has severely affected the company's earnings per share. As such, the net operating cash flow has been affected due to lower revenue amid the pandemic.

The company's board recommended 5 per cent cash dividends for the general shareholders for FY21, down from 10 per cent a year ago.

"Despite all this bad news, investors decided to buy the stocks as manipulators are trying to attract them by fueling the price," said Al-Amin.

Since there was no ceiling on the movement of the stock of Hamid Fabrics yesterday, manipulators took advantage of the opportunity, he added.

Usually, a stock is not allowed to move up or down by 10 per cent in a single day.