General insurers’ share prices soaring sans PSI

Three cos’ share prices doubled within a month

FE REPORT | Wednesday, 12 August 2020

Share prices of general insurance companies are soaring without having any undisclosed price sensitive information while three companies share price doubled in a month.

Of the 35 general insurance companies listed on the Dhaka Stock Exchange, prices of all general insurance companies increased in the last one month after the stock market regulator gave ultimatum to ensure mandatory 2.0 per cent shareholding of each director within 45 days.

Share prices of Pioneer Insurance, Eastern Insurance and Peoples Insurance doubled in a month despite no price sensitive information.

Pioneer Insurance's share jumped more than 130 per cent or Tk 38.60 each to close at Tk 68.30 on Monday. Its share price was Tk 29.70 a month ago on July 12.

Share price of Eastern Insurance also jumped more than 117 per cent in a month to close at Tk 78.60 on Monday. Its share price was Tk 36.20 a month earlier on July 12.

Peoples Insurance share price also soared 101 per cent within a month to close at Tk 28.10 on Monday. Its share price was Tk 15.40 a month ago on July 12. It was also the last week's highest gainer as the company's share jumped 39.71 per cent during the week.

The investors also mostly focused on general insurance companies shares during the period under review.

The stock market regulator's recent ultimatum on ensuring mandatory 2.0 per cent shareholding by each director of listed companies had a positive impact on the insurance stock prices as most of non-compliant directors are in the insurance sector, said a merchant banker.

The Bangladesh Securities and Exchange Commission (BSEC) on July 2 asked 61 directors of 22 listed companies to ensure mandatory 2.0 per cent stake by each director in their own companies other than the independent one within 45 days to continue their directorship.

In 2011, the regulator issued a circular, ordering sponsors and directors to hold a minimum 2.0 per cent of shares of a company individually and 30 per cent jointly. The directive was amended on May 21, 2019, imposing more restrictions.

Of the 22 companies, 14 are from the insurance sector, which have 49 non-compliant directors.

To comply with the rules, many directors will have to buy shares within the 45-day time frame which boost the investors' confidence to the insurance sector stocks, said he said.

The stock market regulator also further directed the listed companies and their board of directors to comply with the directive regarding holding minimum 30 per cent shares jointly by the directors, other than independent ones, within 60 working days from July 29, 2020.

As per the BSEC information, 42 listed companies have not yet complied with the directive of holding minimum 30 per cent shares by their directors jointly.