Published at: The Daily Star, March 07, 2019
Prices of five insurance stocks doubled in a gap of two months although the earnings of the companies did not increase much during the period.
The companies are: Sonar Bangla Insurance, United Insurance, Provati Insurance, Agrani Insurance and Eastern Insurance.
Prices of Sonar Bangla jumped 339.87 percent to Tk 67.3 between January 1 and February 27 this year, according to Dhaka Stock Exchange (DSE) data.
During the period, United rose 233.86 percent to Tk 83.8 and Provati 133.53 percent to Tk 40.4.
The share of Agrani advanced 114.2 percent to Tk 37.7 while Eastern gained 103.25 percent to Tk 56.3.
The five insurers have warned investors through the website of the Dhaka Stock Exchange that there was no undisclosed information related to the hike.
This is nothing but gambling by a vested quarter, market insiders opined.
Abu Ahmed, a stock market analyst, was surprised to see such an abnormal price hike and said there is no economic reason behind the rise.
“Some quarters may have manipulated or some may have spread rumours about the stocks. Otherwise, these shares could not have risen at such a pace.”
A rumour is going round that the government is planning to ensure insurance coverage for all, said Ahmed, who is also a former chairman of the economics department of Dhaka University.
Even if it is true, it will take many years to implement the plan, he added.
There is no specific development in the insurance sector that may have led to the increase in earnings, said Sheikh Kabir Hossain, president of the Bangladesh Insurance Association.
He said sometimes the banking sector goes up in the stockmarket and sometimes the insurance. Other sectors also go up as well.
“This time the insurance sector is rising, but it may fall any time as well. There is no abnormality.”
Hossain, also the chairman of Sonar Bangla Insurance, said the earnings of some companies are good, leading investors to think that the earnings may rise further.
The earnings per share (EPS) of Sonar Bangla, Provati, United and Eastern rose 10.92 percent, 4.54 percent, 10.43 percent and 3.74 percent year-on-year respectively in the January-September period of 2018, DSE data showed.
On the other hand, the EPS of Agrani Insurance was down by 15.79 percent year-on-year.
A senior official of the Bangladesh Securities and Exchange Commission said the commission is aware of the situation and is looking into it.