Energy fears, weak investment trigger stock market rout

Fears over a looming energy crisis, high lending rates, shrinking corporate profits, and sluggish institutional investment triggered a sharp sell-off in Bangladesh’s stock market on Sunday.
On the Dhaka Stock Exchange (DSE), the benchmark index (DSEX) plunged 103 points to close at 5,558, sliding well below the psychologically key 6,000-point threshold. 
Fading post-election optimism fueled the decline, with market insiders noting that investor expectations regarding the new government and regulatory authorities have failed to yield anticipated returns.
Despite a brief morning rally, momentum reversed within the first hour as selling pressure mounted and swept across the board. 
By the close, declining issues overwhelmed gainers 348 to 20, with 21 stocks remaining unchanged.
The DSE-30 index dropped 24 points to 2,116, while the DSE Shariah Index (DSES) declined 22 points to 1,115.
Trading turnover also fell sharply, standing at Tk545.27 crore compared with Tk720.92 crore in the previous session – a decline of Tk175.65 crore.
Energy crisis, high borrowing costs
Former Bangladesh Securities and Exchange Commission (BSEC) chairman Faruk Ahmed Siddiqui said the market had risen rapidly on expectations among investors following the election regarding the new government and regulatory authorities.
As those expectations have not been reflected in the market, he said, the recent decline represents a correction.
He also said the market’s fundamentals remain weak. No new initial public offering (IPO) has entered the market in the past two and a half years, while domestic and foreign investment has not increased significantly.
Instead, existing industrial enterprises are facing various challenges, particularly an energy shortage that is preventing many factories from operating at full capacity.
At the same time, high bank lending rates have increased companies’ financing costs. 
In many cases, lending rates have reached 14-15%, putting further pressure on businesses through lower production and higher borrowing costs.
As corporate profits decline, investor expectations for dividends are also being affected, he said.
Lack of institutional buyers
Dhaka Stock Exchange Brokers Association of Bangladesh (DBA) President Saiful Islam said concerns over the country’s gas and fuel situation played a major role in Sunday’s decline.
He also identified the shortage of institutional buyers as a fundamental weakness of the capital market.
Negative discussions and media reports about gas, fuel and electricity generation have continued for some time, he said, affecting investor sentiment and creating panic.
However, Saiful said the energy crisis alone could not explain a fall of more than 100 points in a single session.
He described the sharp decline as unexpected. Although there was no known specific event or rumour behind the fall, investors appeared to panic and resort to heavy selling.
According to him, the core problem is the lack of institutional buyers. When selling pressure builds, the absence of strong institutional investors capable of absorbing it can magnify a decline within a short period.
As a result, normal market corrections can sometimes turn into sharp crashes, he said.
6,000-point psychological support broken
The 6,000-point level of the DSEX had long been considered an important psychological threshold for the market. Sunday’s 103-point fall pushed the index well below that level to 5,558.
Saiful Islam said the 6,000-point level was an important psychological threshold and that its breakdown had increased concerns among investors.
Sharp fall on CSE too
The Chittagong Stock Exchange (CSE) also recorded a sharp decline on Sunday.
Of the 204 companies traded, prices of 30 shares and units rose, while 157 declined and 17 remained unchanged.
The CSE’s broad-based All Share Price Index (CASPI) fell 171 points.
However, trading turnover on the CSE rose slightly to Tk17.30 crore from Tk15.23 crore in the previous session.