Fu-Wang Foods’ stock prices soar 83% riding on old news

Fu-Wang Foods Limited stocks surged 83 per cent in the span of nine trading days despite repeated warnings from the company that it has no undisclosed information that could contribute to such a jump. 

Besides, the manufacturer of confectionery items is still struggling to make handsome profits and disburse dividends.

Still, the stock of Fu-Wang Foods soared to Tk 42.9 on the Dhaka Stock Exchange (DSE) yesterday from Tk 23.5 on July 2.

It came after its stocks had been stuck in the floor price for several months and no investor had placed any buy order before July 2. Suddenly, some speculations have changed the scenario, said a stockbroker, preferring anonymity.

The stocks are rising mainly on the back of rumours that Japanese firm Minori Bangladesh will buy stakes in the company.

Similarly, there is speculation among general investors that some large investors are buying the shares of the company and its price will go up, the broker said.

Following queries from the DSE, Fu-Wang Foods has informed the DSE twice – on July 9 and July 10 -- that it had no undisclosed information, but general investors are not paying any heed.

Listed with the DSE in 2000, three years after it was founded by Taiwanese investors, Fu Wang Foods makes and markets cakes, breads, biscuits, toasts, snacks and instant noodles. Its paid-up capital is Tk 110 crore.

Md Sharif Al Mahmood, company secretary of Fu-Wang Foods, says he is surprised to see such a price hike within a short period of time.

"We don't know why the stock is rising at such a pace. We are getting phone calls about whether Minori will buy any stake but it is an old piece of news. The company bought a 7.85 per cent stake in January 2022."

"We don't know why people are not trying to know the truth just by looking at the news that has already been published."

Fu-Wang Foods suffered a huge loss in the fiscal year of 2021-22.

Mahmood says the company is trying to make a turnaround and has added puffed rice and new types of biscuits to its product portfolio.

Earnings per share of the company were Tk 0.17 in the first nine months of the last financial year of 2022-23, up from Tk 0.11 during the same period a year earlier.

A merchant banker said when investors hear a rumour that a foreign company will buy stakes in a company and see that the stock price rise, they also believe the speculation and rush to buy the share.

"The people who spread the rumour then get the chance to offload shares, leaving the securities in the hand of general investors. It is the general investors who suffer the loss ultimately."

The merchant banker said by paying heed to rumours, general investors are taking a chance to earn some money. As a result, only the stocks of low-performing companies have been rising while those of the sound and good-performing companies have been struggling amid ongoing economic uncertainty and since the launch of the floor price.

The Bangladesh Securities and Exchange Commission set the floor price of every stock to halt the free fall of the market indices in July last year.

"The floor price is a unique situation for the market and investors are not making a huge profit by trading stocks. That does not mean that they should invest by paying attention to speculations," the merchant banker added.