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Jute Spinners in Manipulation, Recovery from Loses to take 50yrs

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Jute Spinners

Jute Spinners Limited, a company listed on the stock market, is causing a buzz with its shares. Despite being listed on the stock market almost four decades ago, the company did not offer any returns to ordinary investors for a long time. However, the company’s share price has recently witnessed an unprecedented surge. Surprisingly, the management of the company denies any specific reason for the increase in the share price. A.T.M. Mostafa, the company’s secretary, claims that it will take at least 50 years to overcome the losses of Jute Spinners.

Market insiders claim that there is undoubtedly a speculative frenzy behind the abnormal surge in the shares of this downturn company. The appropriate authorities at the Bangladesh Securities & Exchange Commission BSEC should investigate the matter and bring those involved to justice. Over the past few days, a vicious cycle fueled by weak and speculative companies has created an artificial crisis, leading to an increase in share prices. This poses a higher risk of long-term losses for ordinary investors. Recently, the DSE has cautioned investors about this issue. Even the company itself has informed investors that there is no reason for the increase in share prices other than speculation.

It has been reported that on April 18th, the share price of downturn Jute Spinners Limited was Tk 214.40. On May 25th, the latest transaction took place at Tk 445.90. Within just 22 trading days, the company’s share price has increased to Tk 231.50, indicating a growth rate of 107.97% in percentage terms.

Jute Spinners Ltd., a prominent company listed on the Dhaka Stock Exchange, is being scrutinized for an unusual surge in its share prices. According to the latest information obtained on May 15th, the Dhaka Stock Exchange (DSE) is eager to uncover the reasons behind the abnormal increase in Jute Spinners’ share prices. However, the company has informed the DSE that there is no undisclosed sensitive information behind the growth of its share prices. In other words, the company’s shares have risen without any specific cause.

It has been revealed that Jute Spinners did not offer any dividends to its investors despite being listed on the stock market for the past four decades. The company has struggled to generate profits over the last ten years, with its last recorded income occurring in 2012. Even though the company earned a modest amount of Tk 2.06 per share that year, it failed to distribute any dividends to ordinary investors. Since 2012, Jute Spinners has been unable to generate any substantial earnings. Instead, the company ia making losses every year, The company is losing Tk 8 crore every year. The production of the company has been stopped for a long time. As a result, shareholders of the company have been left uncertain for an extended period.

According to the source from Dhaka Stock Exchange, Jute Spinners’ shares were valued at Tk 48.14 per share in 2013. However, over the next two years, the value of the shares declined. In 2014, the shares were priced at Tk 43.64, and in 2015, they dropped further to Tk 19.69 per share. That year the company had a loss of 42 taka 10 paisa per share. In 2021, the loss (per share) increased to Tk44.59 paisa. The company suffered more losses in 2022. In the last year, the loss per share of the company was 44 taka 82 paisa.

Meanwhile, the debt amount of downturn Jute Spinners is 23 times higher than the paid-up capital. It is known that when the company was listed on the stock market in 1984, the paid-up capital was Tk 1 crore 70 lakh, while the company’s outstanding loans amounted to Tk 40 crore 68 lakh. Among the loans, Tk 31 crore 77 lakh were short-term loans, while the remaining Tk 8 crore 91 lakh were long-term loans.

The company’s assets are also negatively affected by the loans, as indicated by the net asset value per share in the 2022 financial report, which stands at a negative Tk 438.42 per share.

According to the auditors’ report of Jute Spinners, submitted in 2016, the company’s operations are considered risky due to ongoing losses. Continuous losses and the accumulation of losses have impacted the company’s financial stability, as stated by the auditing firm.

A.T.M. Mostafa, the Secretary of Jute Spinners, stated to Orthosongbad that there is no undisclosed information behind the increase in the company’s share value. It will take 50 years to recoup the company’s existing losses, despite the fact that the company’s net worth is currently losing by Tk 8 crore annually. However, even if there is a profit, it will not amount to Tk 8 crore per year. Out of the Tk 8 crore losing in net worth each year, Tk 6 crore goes towards bank interest. Even if the company shuts down, it will still have to pay this Tk 6 crore to the bank.

Regarding this matter, Mohammad Rezaul Karim, the Executive Director and Spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), advised investors to exercise caution when investing. Companies with weak fundamentals have a lower chance of providing returns. Currently, shares of weak companies are experiencing volatility. The commission is closely monitoring these issues and has instructed the Dhaka Stock Exchange (DSE) to investigate several companies.

He further emphasized that investors need to be aware when making investments. The commission takes time to investigate any irregularities and impose penalties, during which many investors suffer losses.

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Market Woes Drive Investors Away as Dhaka Bourse Sees Significant Decline

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By June 20 this year, approximately 102,000 beneficiary owners’ (BO) accounts were emptied, and market capitalization plummeted by Tk 1.37 lakh crore due to prolonged poor returns, frustrating investors and prompting them to exit the market.

Data from the Central Depository Bangladesh Limited (CDBL) reveals that in the six months leading up to June 20, the total number of BO accounts with zero share balance surged by 34% to 398,000, while BO accounts with share balances fell by 91,651 to 1.312 million.

During this period, the benchmark index DSEX of the Dhaka Stock Exchange (DSE) dropped over 1,000 points, closing at 5,244, while the blue-chip index DS30 fell by 218 points, settling at 1,875. The market capitalization at DSE also declined by over 17%, ending at Tk 6.43 lakh crore on June 20.

Rising interest rates, taxes on individual investors’ capital gains from listed securities, and a severe confidence crisis due to regulatory interventions are collectively impacting stock market performance, according to stockbrokers and market experts.

The capital market has been grappling with economic uncertainty, exacerbated by the Russia-Ukraine war. In response to the crisis, the Bangladesh Securities and Exchange Commission (BSEC) imposed a floor price in 2022 to prevent a freefall in share prices. Despite lifting the restriction after more than two years, the bearish trend persisted. Consequently, BSEC reintroduced protective measures, including reducing the circuit breaker limit from 10% to 3%.

Abu Ahmed, former economics professor at the University of Dhaka, explained that unprecedentedly high interest rates, especially on treasury bonds, have driven large investors to shift their funds from the stock market to bonds. “With treasury bond rates steady at around 12%, it’s a risk-free, preferred choice for many investors,” he said. This shift has resulted in a fund crisis in the market, he added.

Ahmed also highlighted a decline in the number of reputable companies entering the market and underperformance in key sectors like banks, insurance, non-bank financial institutions, and manufacturing companies. He pointed out that a lack of good governance and long-term policy support has eroded investor confidence. Additionally, the government is withdrawing previously granted investment benefits.

Md Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA), stated in a June 11 press conference that factors such as the absence of high-quality initial public offerings (IPOs), governance issues among stakeholders, and the proposed capital gains tax are diminishing investor confidence. He urged the government to withdraw the capital gains tax, asserting that it exacerbates an already bleak market.

Finance Minister AH Mahmood Ali proposed a 15% tax on individual investors’ capital gains exceeding Tk 50 lakh from listed securities in the upcoming fiscal year budget, amid a market downturn. However, Abu Hena Md Rahmatul Muneem, chairman of the National Board of Revenue, argued in a post-budget press conference that taxation was not the root cause of the market’s issues, citing that long-standing tax incentives had not spurred market growth.

Despite these challenges, the benchmark index of the DSE has risen over the last four trading sessions, recovering 174 points to close at 5,244 last Thursday. Stockbrokers attribute this uptick to investor optimism about a potential rationalization of the capital gains tax proposal and a concessional salvage fund for the state-owned Investment Corporation of Bangladesh (ICB).

EBL Securities noted in their daily market commentary that rumors about the possible withdrawal of the proposed capital gains tax have instilled some confidence among cautious investors.

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Dhaka Bourse Skyrockets, Achieving 4-Day Gaining Streak

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Dhaka Stock Exchange DSE, Bourse on the last working day of the week, 20th June, ended with a hike in Indices and Turnover from the previous working session. This information is known from DSE sources.

452 crore 94 lakh taka shares were traded on this day. 206 crore 50 lakh more tradings were done in DSE today compared to the previous workday, June 19th, Shares worth Tk 246 crores 44 lakh shares were traded last time, Wednesday

The benchmark DSEX increased 82.74 points or 5,244 The Shariah-based index DSES added 24.78 points or 1,146, and the blue-chip index DS30 gained by 31.34 points or 1,875.

Of the issues traded, 288 advanced, 55 declined and 50 remained unchanged.

Linde Bangladesh Limited ranked top gainer on DSE, the share price increased by Tk 424.10 paisa or 43.04 percent. On this day, the share was last traded at Tk 1409.40 paisa.

Global Heavy Chemicals Limited ranked top loser on the DSE, the share price dropped by Tk 1.20 paisa or 3.00 percent. On this day, the share was last traded at Tk 38.90 paisa.

DSE topped on trade is Asiatic Laboratories Limited 14 crore 63 lakh takas of company shares have been traded.

A total of 45 companies’ shares were traded in the Block on Dhaka Stock Exchange. A total of 1 crore 71 lakh 39 thousand 978 shares of the companies were traded. The financial value of which is 113 crore 38 lakh taka.

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National Tea Sets New Subscription Date for Tk279.7cr Placement Shares

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National Tea Company Limited, a publicly traded entity, has announced new subscription dates for its Tk279.7 crore placement shares. Originally slated for nearly a year ago, the subscription had been postponed by regulatory authorities but is now set to proceed following a recent court directive.

According to the company’s disclosure, the subscription period will run from June 19 to August 19 during banking hours. This follows a letter from the Bangladesh Securities and Exchange Commission (BSEC) instructing the resumption of the capital-raising initiative, in compliance with a High Court order.

The primary objective of issuing these placement shares is to fuel business growth, finance working capital, and repay bank loans. However, due to a funding shortfall, the company has been unable to complete its modernization projects and other initiatives, resulting in decreased turnover caused by declining average sale prices in the auction market for its products.

Following the court’s directive, significant progress has been made in implementing the state-owned company’s plans.

In July of the previous year, Jakir Hossain Sarkar, a minor shareholder with just 10 National Tea shares, filed a writ petition with the High Court opposing the company’s scheme to issue fresh shares as approved by the BSEC, alleging unequal treatment of existing shareholders. The court later upheld the BSEC’s approval. Upon a petition by the market regulator, the Appellate Division’s chamber judge temporarily stayed the High Court’s order.

Shareholders have borne the brunt of these legal battles. After the record date, the price of National Tea shares dropped in anticipation of the increased number of shares, and the issuance of placement shares remained uncertain.

In April last year, National Tea received BSEC approval to raise its paid-up capital by issuing 2.34 crore shares at Tk119.53 each, inclusive of a Tk109.53 premium per share. The distribution plan allocated 1.24 crore shares to the government, Investment Corporation of Bangladesh, and Sadharan Bima Corporation at an average ratio of 4.43 new shares for each existing share. Sponsor-directors were allocated 13.8 lakh shares at a ratio of 3.21:1, and general shareholders were to receive nearly 96 lakh shares at a 2.85:1 ratio.

As of Wednesday, National Tea shares closed at Tk388.60 each on the Dhaka Stock Exchange. Founded in 1978 and listed on the capital market in 1979, National Tea cultivates, manufactures, and sells tea and rubber in the local market. The company’s average annual production is about 52 lakh kg of tea, most of which is sold through the Chattogram auction market.

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