Friday, 29 October, 2021

Stocks continue to fall

DSE loses Tk 178bn in one month

Stocks plummeted on Tuesday, with prime index of the major bourse dipping to more than three months low, as worried investors sold shares fearing further fall.

The benchmark index of the premier bourse, DSEX, was slumped by 53 points on Tuesday over the previous day and closed at 5318.75 points, the lowest since December 24, 2018.

The daily trade turnover on the prime bourse also dipped to Tk 3.65 billion (3659.19 million) on Sunday as most of the investors were reluctant to make fresh investment in stocks amid ongoing bearish trend. The two other indices—the DS30 index and the DSE Shariah Index (DSES) – also ended lower.

In the three and half months since the election, DSEX, the benchmark index of the Dhaka Stock Exchange (DSE) lost about 631.26 points, or 10.60 percent.

In the last one month alone, the premier bourse lost Tk 178.16 billion (17,816 crore), or 4.29 percent, from its market capitalisation, according to data from the DSE. The market capitalisation stood at Tk 3973293.150 million on Tuesday, which was at Tk 4151453.182millionon March 10.

Market analysts said ongoing pessimism coupled with lower-than- expected dividend declaration by some banks eroded investors' confidence further.

The investors continued their selling spree amid lower than expected dividend of two banks which prompted investors to sell banking shares and cast a negative impact to the overall market, said a leading broker.

According to market insiders, institutional investors remained cautious amid liquidity crunch while small investors were not confident enough to inject fresh fund in stocks amid ongoing downturn.

The liquidity pressure in banks compelled the institutional investors to take a wait-and-see approach despite the central bank's extension of deadline to bring down the loan-deposit ratio to 83.5 percent by six months.

But the so-called fear about banks' being able to bring down their loan-deposit ratio to 83.5 percent from 85 percent has already been addressed, with the central bank extending the deadline by another six months to September 30. But the situation has not been changed.

According to some stock brokers, unprecedented amounts of placement shares also made the market drier. Placement shares are those acquired in a capital raising event for a select group of investors and from the open market.

Some other factors that affected the stock market severely included the liquidity crunch in the banking sector.  The private sector credit growth hit a 53-month low in February due to the ongoing liquidity crunch due to the rising default loans.

In February, credit growth stood at 12.54 percent, the lowest since October 2014. The growth was much lower than the central bank's target of 16.5 percent for the second half of fiscal 2018-19.

Brokerage houses noted that instability in the banking sector coupled with lack of confidence kept investors mostly inactive.

Even a coordinated meeting of the regulatory authorities including the Bangladesh Securities and Exchange Commission (BSEC) and the central bank with major stakeholders held in March last failed to revive investors' confidence to the market.

The prolonged stagnation with severe credit crunch eroded investors' confidence to the market, said an analyst at a leading brokerage firm. He noted that instability in the banking sector coupled with lack of market triggers kept investors mostly inactive.

Meanwhile, Small investors in the secondary market demonstrated, in front of the Dhaka Stock Exchange (DSE) both on Monday and Tuesday demanding immediate solution to the problems that leads to the continuous fall of share prices.