Banking sector surge propels Dhaka bourse to four-day rally

Benchmarks on the Dhaka Stock Exchange (DSE) continued their rally for the fourth consecutive session, driven by a major surge in the banking sector, with 92% of listed banks seeing significant gains.

The DSEX, the key index of the DSE, jumped 32 points to close at 5,267 today, marking its highest level since November last year. The index had previously peaked at 5,300 points on 18 November.

Over the past four sessions, the DSEX has gained a total of 75 points, while market capitalisation increased by Tk4,100 crore, reaching Tk6.97 lakh crore.

Investor participation also saw a notable rise, primarily driven by the rally in banking stocks. Daily turnover crossed Tk600 crore for the first time since November, reflecting heightened trading activity.

EBL Securities said in its daily market review that buyers maintained their dominance throughout the session, as optimistic investors continued to chase the current rallies in sector-specific issues. Price appreciation in bank stocks, one of the large-cap sectors, added further strength to the market's upward momentum.

Out of the 36 banks listed on the DSE, shares of 33 banks surged, while the remaining three remained unchanged. On average, investors earned a 2.53% return from the banking sector during this rally. The banking sector dominated the DSE's top ten gainers list, with seven banks securing positions.

Leading the rally, AB Bank saw its shares soar 9.58% to close at Tk8. Other top gainers included Social Islami Bank, rising 9.57% to Tk10.3, Islami Bank up 9.02% to Tk47.1, IFIC Bank climbing 8.95% to Tk7.3, First Security Islami Bank gaining 8.33% to Tk5.2, United Commercial Bank advancing 7.60% to Tk9.9, and Exim Bank increasing 4.54% to Tk6.9.

Market analysts attributed the rally to the banking sector's relatively low price-to-earnings (P/E) ratio, which currently stands at 7.18, making it an attractive investment option compared to other sectors. Despite challenges such as non-performing loans and governance issues faced by some banks, several institutions have performed well financially, declaring impressive dividends for 2024.

"Institutional investors, in particular, are capitalising on the opportunity to acquire shares at lower costs, aiming to secure higher dividend yields in their portfolios," said a market insider.

A managing director of a leading brokerage firm highlighted that speculation about potential ownership changes in the banking sector, following the transition of the previous government, has significantly fuelled investor interest. 

This speculation contributed to a remarkable 183% surge in turnover within the banking sector, which reached Tk98 crore on the day. Additionally, the trading volume of banking shares jumped by 235% to 7.60 crore compared to the previous session, reflecting heightened activity, he added.

Another managing director of a prominent securities firm noted that most banks have effectively navigated recent economic challenges by heavily investing in government securities. 

"Many banks have earned record returns from government bonds, surpassing their core business revenues. This is expected to significantly boost their annual profits for 2024," he said.

Riding on this positive outlook, investors are optimistic that banks will announce attractive dividends starting next month. This anticipation has further driven interest in banking stocks, as market participants seek to capitalise on potential high-yield opportunities.

The Chittagong Stock Exchange also settled on a positive note. The selective categories index (CSCX) and all share price index (CASPI) advanced by 80.0 and 135.4 points, respectively.