Dhaka stocks extend losing streak for 2nd week amid political and economic gloom
During the week, investors were mostly active in the engineering sector, which accounted for 13.3% of total turnover, followed by the pharmaceuticals sector at 12.3% and the textile sector at 9.8%.
The key indices of the Dhaka Stock Exchange (DSE) extended their losing streak for the second consecutive week, as cautious investors continued to sell off shares amid rising political uncertainty and a gloomy economic outlook.
Market sentiment was further dampened by concerns over the proposed merger of six banks, while the ongoing earnings and dividend declarations by June-closing companies contributed to sluggish market activity throughout the week.
By the end of the week, the benchmark index DSEX dropped by 154 points to close at 4,968. The blue-chip DS30 fell by 47 points to 1,941, while the Shariah-based DSES declined by 43 points to 1,039. The DSE SME Index also shed 61 points to close at 916.
Market insiders say 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.
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Insiders 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.
An analyst, seeking anonymity, said investors are giving greater importance to political uncertainty, as no stock market can operate normally amid political instability. He added that 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.
However, the analyst 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.
Despite the correction, the weekly average turnover rose by 5.92% to Tk484 crore, compared to Tk457 crore in the previous week. The total turnover for the week stood at Tk2,422 crore, up from Tk2,287 crore a week earlier. However, market capitalisation slipped by 1.23%, to Tk6,909,15.89 crore, from Tk6,995,47.12 crore in the prior week.
Out of the 413 issues traded, 40 advanced, and 340 declined, 9 remained unchanged, and 24 were not traded.
In its weekly market commentary, EBL Securities stated that the benchmark index of the capital bourse extended its losing streak for the second consecutive week, slipping below the psychological 5,000 mark after four months amid persistent bearish sentiment. Investor confidence remained subdued due to prevailing regulatory, political, and banking sector uncertainties, particularly surrounding the proposed merger of six Islamic banks, it said.
The market experienced broad-based sell-offs throughout the week as risk-averse investors offloaded holdings to limit potential losses, further deepening the downturn.
However, late-session bargain hunting in the final trading hour signalled tentative optimism, driven by expectations of an eventual easing of prevailing uncertainties and a gradual market recovery ahead.
During the week, investors were mostly active in the engineering sector, which accounted for 13.3% of total turnover, followed by the pharmaceuticals sector at 12.3% and the textile sector at 9.8%.
Almost all sectors ended in the red except jute, which gained 5.6%, and services, which inched up by 0.8%. The information technology sector was the biggest loser of the week, declining by 9.0%.
