DSE lags behind global markets in May performance

Infofgraphics: TBS

Investors in Bangladesh's stock market suffered significant losses in May, while major global indices recorded some of the highest returns during the same period.

According to the Monthly Economic and Capital Market Overview for May, prepared by EBL Securities, the benchmark index of the Dhaka Stock Exchange, DSEX, fell by 6.03% compared to the previous month. Market capitalisation also shrank by approximately Tk5,000 crore during the month.

In sharp contrast, major global indices delivered strong performances despite the impact of reciprocal tariffs introduced under Trump's administration. In the United States, investors saw the highest returns, with the Nasdaq surging by 9.48%. 

Vietnam's VN30 index rose by 9.30%, Pakistan's Karachi 100 gained 6.99%, Sri Lanka's CSE All-Share Index increased by 6.43%, and South Korea's KOSPI climbed 6.42%. 

Indonesia's IDX Composite grew by 6.04%, the UK's FTSE 100 advanced 2.70%, China's Shanghai Index rose 2.57%, and India's BSE Sensex recorded a 1.73% gain.

Among peer countries, only Thailand posted a decline, though its losses were far less severe than those seen in Bangladesh, according to the EBL Securities, also a subsidiary of Easter Bank, report.

Country's one of the leading brokerage firms said in its report, the bearish sentiment in the country's capital market deepens amid no signs of respite for investors from the prolonged market downturn, while declining market indices continue to hit new lows.

The month started with dominant selloffs due to rattled investors' overreaction to recent geopolitical tensions in neighbouring countries, it added.

Meanwhile, the chief adviser's meeting with the capital market stakeholders aimed at addressing the prevailing market crisis also fell short of stimulating any immediate positive momentum due to a lack of strong outcomes to revive investor confidence.

Moreover, prevailing social-political unrest and political uncertainties added further strain to the investors' woes. Apparently, the lingering pessimism kept most participants on the sidelines, while foreign investors also preferred trimming their exposure to Bangladesh's capital market amid concerns over further Taka depreciation following adherence to a fully market-driven exchange rate regime, coupled with apprehensions of an uncertain market outlook, EBL Securities noted.

The relentless bearish spell pervaded the trading board throughout the month, causing the benchmark index, DSEX, to dip down to a 5-year low of 4,638 points, plummeting by 280 points at the end of May. Meanwhile, the average daily turnover in May further declined by 18% MoM to Tk320 crore.

Will the next fiscal year be any different?

Finance Adviser Salehuddin Ahmed proposed several tax and regulatory measures in the FY2025-26 budget aimed at reviving Bangladesh's capital market, which has suffered from low investor confidence and past irregularities.

Key proposals include widening the corporate tax gap between listed and non-listed companies to 7.5% (from the current 5%), reducing advance income tax (AIT) on securities trading from 0.05% to 0.03%, and lowering the corporate tax rate for merchant banks by 10 percentage points to 27.5%. However, the AIT or withholding tax rate on interest income from debt instruments increased to 10% from 5%.

However, market insiders and experts criticised the new budget for overlooking affected investors, noting the absence of incentives to help general investors recover their losses.

In his budget speech, Salehuddin said that to restore momentum in the capital market, damaged by past irregularities and manipulation, the interim government is undertaking reforms to reduce state ownership in multinational companies, encourage large local firms to list, and enforce legal actions against market wrongdoers.

Former Bangladesh Securities and Exchange Commission (BSEC) chairman Faruq Ahmad Siddiqi offered a more critical view. He argued that the proposed incentives would mainly benefit brokerage firms and merchant banks rather than general investors.

"Reducing turnover tax will mostly help brokerage firms. Even when the tax gap between listed and non-listed firms was 10%, not a single major company came to the market. Bringing it down to 7.5% won't change that," he said.

Instead, he emphasised the need for strong legal enforcement: "Laws exist in the country, but they are not implemented. That's the core reason behind the current state of the capital market. If legal compliance is ensured, all stakeholders — including retail investors — will benefit."