DSE SME stocks take a big hit in one year

The price index of the small and medium enterprise (SME) board of the Dhaka Stock Exchange (DSE) has suffered a steep decline over the past year, shedding 345 points, or 27 per cent, to drop below its base level to 950 points as of Monday, marking a huge correction since the political changeover in the country in August 2024.

The erosion in the SME platform's value was triggered by steep price drops in 15 of the 20 listed SME stocks, many of which had previously soared without solid financial backing.

Market analysts say the downturn was inevitable, given the artificial nature of past price hikes that lacked alignment with corporate earnings or operational performance.

Launched on September 30, 2021, with six companies, the DSE SME board debuted with a base index of 1,000 points. It reached a peak of 2,244 points in August 2022 during a wave of speculative trading.

However, between August 19, 2024, and August 18, 2025, SME stocks saw price corrections ranging from 3 per cent to as much as 76 per cent. Consequently, the market capitalisation of the SME board plunged by over Tk 10 billion to stand at Tk 19.23 billion.

In contrast, the main board of the Dhaka Stock Exchange witnessed a modest 6 per cent decline in its benchmark index over the same period, despite political upheaval. Its market capitalisation increased by Tk 154 billion, bolstered by gains in select large-cap stocks.

Stocks such as Yusuf Flour and Himadri, previously dominant in driving the SME index upwards, experienced significant corrections over the past year.

Several SME stocks had surged earlier without any accompanying positive earnings disclosures, prompting concerns about market manipulation. At the time, analysts had flagged speculative behaviour and rumour-driven trading as key drivers behind the inflated valuations.

The Financial Express also ran several reports on the abnormal price hike in share prices of small-capital based companies, particularly Yusuf Flour and Himadri.

After political changeover, Khondoker Rashed Maqsood, a former banker, was appointed as the chairman of the Bangladesh Securities and Exchange Commission (BSEC) on August 18 last year.

Following the change in the political landscape and appointment of new BSEC chairman, investors started selling off their shares as speculations ran rife that the newly formed BSEC commission might take tougher actions to rein in price manipulation, said Akramul Alam, head of research at Royal Capital.

In the past one year, the little-known Yusuf Flour Mills' stock plunged 67 per cent to Tk 2,018 each on Monday. It had traded at Tk 6,137 per share on August 19, 2024.

What is more surprising was that little known SME stock -- Yusuf Flour -- exhibited abnormal price hike and reached at Tk 6,352 per share on June 30 last year, becoming the most-expensive stock on the exchanges, leaving many well-performing stocks behind.

Even after the massive price erosion, the stock, which closed on the Dhaka bourse at Tk 2,018 share on Monday, is overvalued, considering its price-to-earnings (P/E) ratio of 142 as of Monday.

The share price of Yusuf Flour Mills should not be that high, "higher than any other blue chip" in the main market, said Mr Alam.

Another SME firm Himadri, which runs six potato cold storages in the northern part of Bangladesh, saw its stock plunge 53 per cent to Tk 1,022 per share in the year to Monday.

Himadri's stock had surged to as high as Tk 10,000 each in November 2023, leaving market experts in awe, as stocks of good companies with handsome profits and dividends given to shareholders were nowhere near that.

The market regulator in July last year finally penalised one individual investor, and three firms with fines of Tk 17 million in total for manipulating Himadri's stock.

The BSEC slammed the fines upon the completion of hearings based on investigation reports submitted by the prime bourse.

During an investigation of the DSE, the four investors were found involved in manipulating the share trading of Himadri between April 27 and August 28 of 2023.

On taking charge, Khondoker Rashed Maqsood, chairman of the stock market regulator, and its commission took a number of market supportive measures and tough actions against wrongdoers.

The new commission has been working for sustainable development of the capital market and to bring those involved in irregularities to justice to ensure transparency and accountability.

In a major drive to enforce compliance, the new commission slapped big fines on several market manipulators and errant companies for involvement in malpractices during the tenure of the previous commission. That sent out a warning to the SME market manipulators.

To address irregularities in the market, the securities commission heightened its surveillance too, said a BSEC official.

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