Why stocks downfall continues for seven days

Dhaka stocks have experienced a downward trend over the last seven consecutive sessions, coinciding with the imminent conclusion of the tenure of high-ranking officials of the Bangladesh Securities and Exchange Commission (BSEC) in May, just two months away.

The benchmark index DSEX of the Dhaka Stock Exchange (DSE) settled at 5,898 after losing 69 points today, resulting in a total erosion of 268 points over the seven days. The key index fell below 5,900 points to a 33-month low today.

Following Monday's fall, the market capitalisation of the DSE fell by Tk24,812 crore, settling at Tk7.27 lakh crore.

Discussions surrounding the potential re-appointment of the current chairman and commissioners of BSEC as their terms conclude have contributed to the recent decline in the stock market. Uncertainty about whether the current commission will continue for another term or if new appointees will take over has cast a shadow of uncertainty over the market's future trajectory, according to market insiders.

Meanwhile, the BSEC warned against spreading false information and rumours about the capital market on online platforms, including social media, on 17 March. In such a situation, the stock market watchdog said it will take legal action against those involved in spreading various rumours including market conditions or share price predictions.

The regulatory body perceives that market discipline is being disrupted by rumour mongers.

EBL Securities said in its daily market commentary, the market witnessed a free fall, failing to recover from the enduring pessimism pervading the trading floor, as a result of lasting concerns stemming from sudden policy changes, which have significantly impacted investor sentiment.

Furthermore, the situation has been exacerbated by the shortened trading hours during Ramadan and the anticipation of fund withdrawals ahead of Eid, the commentary added.

Market volatility still persists as market confidence is yet to be restored owing to concerns regarding the market outlook. Moreover, a portion of investors opted to remain on the sidelines, waiting for a clear indication of the market momentum ahead, EBL Securities said.

According to the report, British American Tobacco, Renata, Orion Pharma, IFIC Bank, and United Commercial Bank played vital roles in Monday's index downfall.

Expressing concern, Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA), mentioned that the Dhaka bourse itself serves as a primary regulator for the stock market, emphasising that when there is a disruption in coordination between the two regulators in performing their duties, investors become confused, leading to adverse effects on the capital market.

Recently, investors have been grappling with confusion stemming from decisions regarding the downgrading of stocks to the Z category and the withdrawal of floor prices, he said.

"While category downgrading is typically within the purview of the stock exchanges, the BSEC often interferes in these matters, adding to the uncertainty in the market," he continued.

Meanwhile, several top officers from brokerage firms claimed that the market is facing a liquidity shortage due to higher interest rates.

The DBA president said, "We have an interest rate of over 13% on Treasury bonds here. In line with this, banks and non-bank financial institutions are also increasing interest rates. In such a situation, money goes out of the stock market and goes to deposits in all countries in the world. We are no exception.

"Investors are now turning to deposits to stay risk-free. Moreover, there is no supply of good shares to attract investors, nor is there any effort." 

He also said that for the last year, most of the companies paid low dividends. Besides, economic uncertainty increases the risk for investors.

Meanwhile, trading activities remained sluggish as market turnover decreased by 5% to Tk486 crore today compared to Tk514 crore in the previous session.

In terms of sectoral performance, engineering issues took the lead in turnover, contributing 19%, followed by the pharmaceutical and food sectors.

Golden Son emerged as the most actively-traded stock with a turnover value of Tk20 crore, followed by Fu-Wang Ceramic and Golden Harvest Agro Industries.

All of the sectors displayed dismal returns, out of which paper, ceramics, and jute exerted the most corrections on the bourse.

Out of the 396 issues traded, 34 advanced, 330 declined, and 32 remained unchanged.

Newly-listed Asiatic Laboratories secured the top position on the gainers' table as its share price jumped over 9.79%, followed by Baraka Power and Baraka Patenga Power.

On the other hand, Golden Son, Khulna Printing, and Aftab Auto were the top losers.

The port city bourse, Chittagong Stock Exchange, also settled in the red terrain today. The selected indices, CSCX and All Share Price Index (CASPI), declined by 96 points and 161 points to settle at 10,165 and 16,929, respectively.