89% of stocks plummet as policy rate hike triggers sell-off

The Dhaka Stock Exchange (DSE) experienced a significant downturn today, with 89% of traded stocks plunging as funding costs surged following the central bank's 50-basis-point hike in the policy rate, now set at 9.50%.

Following the downfall of majority stocks, the benchmark index DSEX of the Dhaka bourse lost 41 points to settle at 5,736, while the blue-chip index DS30 plummeted by 14 points to close at 2,095.

During the session, only 28 issues advanced, while 355 declined and 14 remained unchanged.

Increased selling pressure from investors boosted market turnover by 11%, reaching Tk797 crore, compared to the previous session.

The market capitalisation on the DSE fell by Tk5,000 crore to settle at Tk6.89 lakh crore.

Market analysts say the Bangladesh Bank's decision to raise the policy rate by 50 basis points to 9.50% in an effort to combat high inflation is expected to further increase funding costs, prompting investors to withdraw from the sluggish stock market and shift their investments toward fixed-income instruments.

Additionally, the DSE abruptly downgraded 27 stocks to the Z category recently, following an order issued by the Bangladesh Securities and Exchange Commission (BSEC) in May. Analysts noted that the decision rattled investor confidence, leading to a sell-off as fears of policy uncertainty grew.

EBL Securities, in its daily market review, said Dhaka stocks logged extreme hurdles due to the subdued market sentiment as investors adversely reacted to the strict regulatory measures, being apprehensive over an uncertain market momentum.

Despite opening on a positive note, primarily driven by particular bank sector stocks, the benchmark index succumbed to the subsequent sell pressure from cautious investors who preferred to trim their equity exposures, causing the majority of the scrips to settle in the losing territory by the end of the session, it noted.

The EBL Securities further said the policy rate hike by the central bank also acted as a catalyst for investors' watchful stance regarding the market's momentum.

On the sectoral front, bank stocks accounted for the highest turnover at 35.3%, followed by pharmaceuticals at 13.5% and telecom at 7.8%. 

BRAC Bank was the top traded company in terms of value, with Tk113.82 crore, followed by Islami Bank Bangladesh with Tk56.60 crore, Grameenphone at Tk51.52 crore and SIBL with Tk37 crore.

All of the sectors, except the bank, displayed negative returns, out of which jute, paper and ceramic exhibited the most negative returns.
Islami Bank led the gainers' list as its share price jumped 10% to reach Tk70.40, followed by SIBL, Grameen One Mutual Fund and Islamic Finance.

The securities regulator yesterday directed the DSE to investigate the recent unusual price surge in Islami Bank shares and instructed it to submit a report within 30 days.

Meanwhile, Fu Wang Food topped the losers' list with a 9.94% drop, bringing its share price down to Tk15.4, followed by Paramount Insurance with a 9.86% decline to Tk39.3 per share, Navana Pharma with 9.84% fell to Tk54, and CNA Textile, down 9.83% to Tk5.5 per share.