Why investors should be careful

The warning to the investors at this market level is wise and timely. But I fear that offloading government shares will just postpone the problem instead of really solving it. This will prolong the anxiousness of the investors and market uncertainty only to end in even bigger disaster pulling the entire economy into it!

High Price Earning (PE) is certainly a matter of concern and buying stocks at this price level is highly dangerous. PE ratio is the company’s current share price compared to its earnings per share. In general, a high PE ratio reflects that the investors are expecting higher earnings or that there is a strong chance that they will be able to make a capital gain.

According to Mr. Rizvi “There are many companies that have no growth or profitability and they are not even paying dividends, but their share prices are rising every day.”

“If the investors buy into the companies that are already overvalued, and if the market faces a disaster-like situation, the responsibility will be theirs [investors].”

If this statement is true then it is not clear how the offloading government shares can solve this problem. Are the government companies performing better than those of the private sectors? experts may ask.

Offloading government shares does not add value to the solution of the current problems of over valuation of stocks. It may, very temporarily, look like a solution but it is in fact going to cause even a bigger disaster in the long run, pulling the entire economy of Bangladesh into it, making the country a bankrupt state. All the economic growth and success achieved so far will be ruined like an earthquake!

However, some vested groups of investors who are trying very hard to pull the government companies into this disaster, will benefit from buying majority shares or the entire company for peanuts, at the end. It this the name of the game?

If the Ministry of Finance and the honourable Prime Minister want to be part of such a national economic disaster, which will ultimately COST their POWER, then this will be their choice.

My humble advice to them would be to analyse their economic and political cost-benefit ratios before any hasty intervention because such important and sensitive matters need to be handled in a very farsighted manner, very carefully and wisely.

The investors should be extremely careful buying new stocks at this market level. They should rather analyse and cross check company’s fundamentals including profitability, growth, order book situation, potentials of revenue collection, assets, efficiencies of the operations and management.

In any case, I feel that the capital market of Bangladesh will remain interesting and feed us with a lot of rumours in the coming months or so. Let us stay alert!

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