DSE elite club: Beximco, Summit, Islami Bank slip, while Walton, Prime Bank, Kohinoor gain

Infographic: TBS

Nine heavyweight firms, including Beximco Limited, Summit Power, Islami Bank, Heidelberg, Linde, and Orion Pharma, have dropped out of the Dhaka bourse's elite club of top 30 stocks due to their underperformance in the past three months.

On the other hand, surpassing them in a race involving more trading of shares, alongside criteria of firm profitability and market value, nine others, including Walton, MJL Bangladesh, Prime Bank, LankaBangla Finance, IDLC, Kohinoor Chemicals, Padma Oil, and Bangladesh Submarine Cables, have entered the blue-chip index DS30.

Analysts attributed the change to the companies' business performance, alongside investors' preference for the winning companies in the current context. 

The Dhaka Stock Exchange (DSE), based on its index methodology designed and developed in 2013 by S&P Dow Jones Indices, selects its top 30 "investable" stocks every six months. The latest review will be effective from 19 January.

To enter the blue-chip list, a firm must have at least Tk50 crore in share value held by outsiders, alongside a profit in the past 12 months.

Additionally, the average daily turnover of its shares must be above Tk50 lakh for the past three months. If no new eligible entrants are found, the average daily stock turnover criteria for the current constituent firms are lowered to Tk30 lakh.

"Investors are cautious about politically affiliated companies since the interim government took charge in August," said Akramul Alam, head of Research at Royal Capital, adding that companies perceived to be close to the ousted Awami League government are generally seeing business deterioration and their shares are less popular on the bourses now.

For instance, Beximco had a massive layoff last month amid increasing losses, in contrast to its earnings and stock price boom in 2021-22. 

However, Beximco shares are still stuck at the floor price as no investor is willing to buy them at the artificially held high price of Tk110.

Summit Power deferred its performance disclosure and faced a sharp fall in its share price, dropping to Tk14.7 yesterday from over Tk24 in August. Investors are trading less of its shares.

Sea Pearl Beach Resorts, founded and run by an Awami League leader, which once thrived in the stock market, now attracts no buyers as the stock crashed after manipulation.

Paramount Textile, Genex Infosys, Islami Bank, and Orion Pharma also dropped off the DS30.

However, not everything is linked to political affiliation, said chartered financial analyst Md Moniruzzaman, managing director of Prime Bank Securities.

For instance, he noted that multinational industrial gas giant Linde Bangladesh and cement maker Heidelberg Materials Bangladesh also dropped off the blue-chip list as the economic slowdown made investors cautious about their shares.

Investors are now seeking opportunities in the stocks of professionally run, market-leading companies, which are politics-neutral and generally better equipped to navigate tough business environments, Moniruzzaman added.

Homegrown electronics giant Walton Hi-Tech Industries, lubricant and liquefied petroleum gas market leader MJL Bangladesh, state monopoly Bangladesh Submarine Cables, petroleum distributor Padma Oil Company, cosmetics maker Kohinoor Chemicals, private commercial lender Prime Bank, top-tier non-bank financial institutions IDLC, and LankaBangla Finance all entered the blue-chip club.

Even though analysts did not consider struggling company Khan Brothers PP Woven Bag Industries a blue-chip firm, investors trading its shares helped it make its way into the elite club.

They said the DSE overlooks the governance factor of a company, which often undermines the spirit of the blue-chip club.

Return of dozens to the broad-based index

The DSE yesterday also announced that 87 firms will enter its broad-based index, DSEX, most of which were ousted a year ago due to their stock inactivity amid the floor price restriction.

After a year of significant disconnection from individual stock prices, the DSEX will better reflect their price movements from 19 January, said Md Abdul Kader, head of the corporate and intermediaries department at LankaBangla Securities.

Big companies including ACI, Crown Cement, ICB, IDLC, RAK Ceramics, Square Textile, Summit Power, Titas Gas, United Power, and Walton Hi-Tech Industries are regaining their seats in the DSE broad index as they now fulfil the criteria.

The DSE requires a company to have at least Tk10 crore value of its free-float shares that are tradable without prior regulatory announcement, Tk10 lakh average daily stock turnover for six months, and stock transactions on at least half of the trading days in the previous three months to enter the DSEX.

Due to the restrictive floor price mechanism, 83 companies had failed to secure enough stock trading and were ousted from the DSEX in January 2024, while 16 entered.

The detachments of many firms prevented the major index from falling in proportion to the decline in individual stock prices after the floor was implemented in 2024.

DSEX would have fallen by around 20% more in the past year without the massive ouster last year, according to analysts.

However, their return will cause the index to rise and fall more than it currently does. With 14 firms ousted this year and 87 added, the DSEX will have 326 firms by 19 January.