Are investors coming back?

Dhaka stocks, after months-long depression due to poor liquidity and economic and corporate earnings uncertainties, have gained for the seventh consecutive session on Tuesday.

With the longest winning spell since June last year, DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), closed at 6,263 – highest since 14 February.  

Stockbrokers and analysts thanked the emerging positive vibes in the market fuelled by some signs of corporate earnings recovery amid some ease in macroeconomic adversities. At the same time, the regulator's positive gestures through several supportive measures, including the recent relaxation in margin loan regulations helped the market stay upbeat.

"Earnings recovery is restoring investors' confidence; they are taking positions in many stocks they prefer," said Md Rehan Kabir, head of research at brokerage firm EBL Securities.

The most common question on the streets, however, seems to be if investors are coming back to take long-term positions in stocks or they are just chasing short-term trends that trigger a fall after short rallies.

The question is getting more and more relevant for average investors as they have been hit hard by the market volatility for months when the DSEX, in the middle of its recoveries, went into a nosedive repeatedly.

"Most of the trades seem to have been for quick trading returns instead of long-term holding or investment purposes," feels Rehan Kabir.

He blamed the still looming concerns regarding the power situation over the summer season, macroeconomic factors like remittance that had some shortfall even during the Eid season.

Lucrative opportunities ignored

There are sufficient stocks that have come down to a buying range after prolonged declines. And picking the undervalued ones compared to their assets, earnings and dividends to hold on to for two to three years would be a good bet in the market nowadays, former DSE Director and BLI Securities Managing Director Minhaz Mannan Emon told TBS in a recent interview.

"The possibility for 30-50% capital gains on top of the cash dividends from the stocks is alive here," he said.   

Additionally, many blue-chip stocks with tremendous long-term returns have come down to lucrative prices and are mostly stuck on the floor prices.

On Tuesday, 273 of the DSE scrips were stuck on the floor prices, while only 127 were trading above their floors that had been prevailing for almost nine months.

Bangladesh Merchant Bankers Association Vice President Md Moniruzzaman said it seems everyone is trying to play the market timing game, and that is why a number of fundamentally lucrative stocks find no buyer at floor prices.

The chartered financial analyst, who is managing director of IDLC Investments, in an interview with TBS a few weeks ago said he would start buying many of the blue-chip stocks if he was given fresh funds.  

Stock market expert Abu Ahmed, a former professor of economics at the University of Dhaka, said the regulatory measure of floor price to artificially hold stocks higher did not allow prices to find the authentic equilibrium points between demand and supply. And the fear of no exit opportunity on the floor prices has kept many investors from buying stocks.

At the same time, the confidence of those already holding floor-stuck stocks weakened as they could not buy-sell stocks. The situation was worse for those who used margin loans to buy more stocks.

However, the market carried on with its upward momentum throughout the session on Tuesday while the daily turnover in the DSE jumped 29.1% to Tk713 crore – highest since 6 March this year.

Investors are eager to learn if the DSEX sustains itself or nosedives again.