Dhaka stocks extend bearish run amid rising political uncertainty

The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), continued its losing streak for the third consecutive session yesterday, with turnover also declining as investors remained cautious due to election-related uncertainties and a weakening economic outlook. 

Investors have begun to perceive the political situation as a more significant concern than other existing market challenges.

The DSEX fell by 42 points to close at 5,019 yesterday, while the blue-chip DS30 index dropped 11 points to finish at 1,946. The Shariah index also declined by 11 points, settling at 1,056. Market turnover decreased by 12.52% to Tk554 crore, compared to Tk519 crore in the previous session. Out of 396 issues traded, 56 advanced, 277 declined, and 63 remained unchanged.

Market insiders said that ahead of the upcoming national election, major investors are adopting a wait-and-see strategy. This cautious stance has resulted in lower market participation and reduced turnover, creating continuous pressure on the stock indices.

Analysts noted that political uncertainty is currently the primary factor driving market sluggishness, affecting economic activities across several sectors. New investment has remained almost stagnant, while imports of capital machinery – crucial for industrial expansion – have fallen sharply. Private sector credit growth has also decelerated, reflecting subdued business confidence.

In addition, many fundamentally strong companies are witnessing de-growth, further weakening overall investor sentiment. The broader economy remains slow, and historically, the stock market tends to remain dull around this time of the year, adding to existing concerns.

Ashequr Rahman, Managing Director of Midway Securities, said investors are giving greater importance to political uncertainty, as no stock market can operate normally amid political instability. 

He added that during this period, interest rates on treasury bonds and bills are rising, while several listed companies are declaring lower dividends. As a result, retail participation in the market is gradually shrinking.

Rahman, however, believes investor activity could rebound once political stability improves. Market observers also suggest that any positive political development or sentiment could quickly shift the market outlook and trigger a short-term recovery.

Meanwhile, the capital market regulator has taken several reform initiatives, some of which have already delivered positive results. However, their full impact is yet to be reflected in overall market performance.

Most large-cap sectors posted negative results on Tuesday. The Food & Allied sector suffered the highest decline of 1.21%, followed by Engineering 1.04%, Fuel & Power 0.86%, Pharmaceuticals 0.82%, NBFI 0.65%, Banking 0.56%, and Telecommunication 0.40%. Block trades accounted for 3.2% of total market turnover, while Summit Alliance Port Limited 1.3% topped the turnover chart, generating Tk30.8 crore.

The Chittagong Stock Exchange (CSE) also closed lower, with the Selective Categories Index (CSCX) and the All Share Price Index (CASPI) dropping by 55 points and 91 points, respectively.