DSE turnover shrinks to a 6-week low as buyers shy away

Having funds stuck in the depressed market, buyers have been gradually shying away from stocks for the last four consecutive weeks, and that has dragged down the Dhaka bourse's broad-based index to a five-week low of 6,227.94 points on Sunday.

Due to the inaction of an increasing number of investors, according to stock brokers, daily turnover in the Dhaka Stock Exchange (DSE) again came down below Tk300 crore for the first time since 8 January when the market started to recover mainly riding on the positive half-yearly earnings growth posted by around one-third of listed companies.

However, the overall economic climate, stressed corporate earnings and the weakening confidence on the stock market did not allow investors to buy and hold stocks boldly, instead many opted in the quick profit-booking game to hold more cash.

Stockbrokers and analysts said, with 70-80% scrips without bidders at the floor prices or the extremely narrow 1% space for falling a day, majority investors' funds went stuck.

And they caught a panic earlier this month that the floor prices might be withdrawn sooner than expected, said market people, as the Bangladesh capital market is at a risk of being eliminated from the MSCI Frontier Market Index as the index provider Morgan Stanley Capital International started treating Bangladesh a special case due to the poor liquidity in the stock market brought by the floor price restriction.  

Top officials at the Bangladesh Securities and Exchange Commission (BSEC) have been trying to assure that the floor prices would not be completely withdrawn suddenly. But it is not paying off due to the investors' caution for not letting more of their funds stuck at floors that are not guaranteeing their capital protection anymore.

The BSEC imposed floor prices on each listed scrips at the end of July last year to offer investors an unconventional protection against the macroeconomic challenges.

And, as it artificially held the prices higher value, investors' barely found opportunities to make big safe bets in the market, while the weaker market sentiment ignited short-term profit-booking.

"Neither floor, nor the 1% downside restriction is helping me nowadays," said Md Alauddin, a retail investor.

"My funds are stuck and I am yet to find any buyer for most of my stocks while some are falling by 1% everyday," he expressed his frustration.

Some of his stocks got rid of the floor price when the BSEC brought 168 scrips out of the floor and let them fall by 1% a day.

Some of the 168 scrips had ups and downs, while some others already fell by more than 30% and yet no buyer.

"Had the stocks been in spontaneous trading, I could liquidate them with some losses and would sit on cash now," said Alauddin.

During the closing bell on Sunday, 100 of the 168 scrips were below the floor price from where they started to fall. Only 33 were found to be above the floor while 35 were flat.

Of the declining scrips, 35 already fell by 20-32% in less than two months and the most painful part of the stocks were the complete lack of selling opportunity.

On the other hand, only 12 of the 168 scrips showed double digit gains, including some abnormal rally in a very few small cap stocks.

Of the 232 scrips that were still under floor price restriction, only 53 were trading above floor on Sunday, while 179 had no bidder at all.

In total, the market having only 73 of the 400 scrips in active trading generated the Tk285 crore turnover on Sunday.