Despite annual losses, Hamid Fabrics stock soared 67% Thursday
Deterioration in its financial performance also dragged net asset value per share to below Tk38, from over Tk40 a year ago
There is a surprising trend, especially in the textile sector, that a company announces a merely decent or even a poor business performance in the latest fiscal year alongside some dividends, and its stock price skyrockets in the very same session, capitalising on there being no circuit breaker.
Hamid Fabrics Ltd on Thursday informed local stock exchanges that its revenue and profitability dropped in fiscal 2020-21 amid the pandemic disruptions and it posted a Tk1.76 net annual loss against each share with a face value of Tk10, where its profits per share in the previous year stood at Tk0.42.
The deterioration in the financial performance also dragged its net asset value per share to below Tk38, from over Tk40 a year ago.
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The company, however, recommended 5% cash dividends from its reserve funds, which was 10% a year ago.
As per the rules, on the day of the annual corporate disclosure, the company had no limit in its stock price to go higher or lower. On regular trading days, the stock price cannot advance or decline by more than 10% and for larger scrips, the limit is even tighter.
Hamid Fabrics shares, which had dropped to Tk16 per share earlier this week from over Tk21 earlier this month, skyrocketed to Tk30.6 at market closing on Thursday, a more than 67% gain in a single day.
"This must not be a spontaneous investor response and some people might have been manipulating the situation," said Jamal Uddin, a stock investor in the capital.
Even on the day before the corporate disclosure, investors were not much interested in Hamid Fabrics stocks at the Tk18 level and it is unlikely that investors would chase the same stock at a 50-60% higher price, especially after posting losses, he said.
The regulator should check for any aberrations in such errant market moves aiming at a pump and dump scheme, he urged, adding that a similar case was seen in the Fareast Knitting and Dyeing stocks.
Fareast Knitting shares gained more than 34% on October 10 amid no circuit breaker when the company announced a moderate earnings improvement and dividends on that day, and finally, the price almost came back to the base price after market correction.
On Thursday, most textile stocks soared following the Hamid Fabrics miracle.
