DSE turnover plunges 58% in 15 sessions as liquidity dries up

Daily turnover on the Dhaka Stock Exchange has plunged 58% in just 15 trading days, falling by Tk704 crore from Tk1,211 crore on 4 August to Tk507 crore today (25 August), as weak fresh fund inflows, investor caution and concerns over the economy weigh on market activity.

Turnover stood at Tk507 crore today, compared with Tk1,211 crore 15 trading sessions earlier. The decline of Tk704 crore represents a 58.13% drop in daily market activity.

Against this backdrop, the DSE benchmark index DSEX fell 3 points to 5,640 today.

The DS30 index declined 5 points to 2,126, while the DSES index fell 3 points to 1,127.

A total of 391 companies and mutual funds traded on the day. Of them, 175 declined, 152 advanced and 64 remained unchanged.

Market insiders said the sharp contraction in turnover reflects a combination of weak liquidity, limited inflow of fresh money, the recent market correction, heightened regulatory scrutiny and growing uncertainty among investors.

They said the market had earlier rallied strongly, with the DSEX rising from around 5,200 points to nearly 5,900 points. The subsequent correction prompted some investors to book profits, while others have adopted a wait-and-see approach amid uncertainty over the market's near-term direction.

As a result, buying pressure has weakened, while investors are becoming increasingly selective about deploying fresh funds.

Fresh money flow remains weak

Market insiders said the most immediate concern for the market is the lack of fresh or net new money.

Much of the current trading activity is being generated by existing investors' funds. With limited new money entering the market, the capacity to absorb selling pressure has weakened significantly.

They said this is particularly important because a market rally requires sustained fresh liquidity. Without new funds, even fundamentally sound stocks can struggle to attract sufficient buying interest.

The sharp fall in turnover over just 15 trading sessions is therefore being viewed as a sign of weakening market liquidity rather than simply a decline in share prices.

Gas and power crisis deepen investor concerns

The nationwide gas and electricity crisis is adding to the pressure on investor sentiment, market insider said.

EBL Securities, in its daily market commentary, said persistent concerns over the market's near-term trajectory amid the gas and electricity crisis continued to weigh on investor sentiment and limit the prospects for a recovery.

The brokerage said the DSE witnessed volatile, see-saw trading throughout the session. Bargain hunters dominated through the middle of the session, but intensified broad-based selling in the final hour wiped out earlier gains, leaving the benchmark index marginally lower.

Market insiders said the energy crisis is also raising concerns over the earnings prospects of production-oriented listed companies.

Many factories are operating below normal capacity because of inadequate gas and electricity supplies. This could affect production, sales and profitability, particularly in sectors such as textiles, ceramics, plastics and other manufacturing industries.

As a result, investors are becoming more cautious about buying shares based on future earnings expectations.

Regulatory scrutiny adds to investor caution

Increased regulatory activity has also contributed to the cautious mood, market insider said.

The DSE is investigating the activities of several listed companies, while the Bangladesh Securities and Exchange Commission (BSEC) has decided to strengthen spot inspections.

Recent administrative actions against officials of the BSEC and DSE have also generated mixed reactions among investors.

Market insiders said stronger regulatory oversight should improve transparency and accountability over the long term. However, in the short term, the heightened scrutiny has encouraged investors to take a more cautious approach.

UCB rights shares

The market could also face additional liquidity pressure from the issuance of United Commercial Bank (UCB) rights shares, market insider said.

The BSEC recently approved the bank's Tk775 crore rights issue. Market insiders said some existing investors may have withdrawn funds from the secondary market to subscribe to the rights shares.

At a time when fresh fund inflows are already weak, raising money for a large rights issue could prompt some investors to sell existing holdings, they said.

This could create additional selling pressure in the secondary market and further constrain liquidity in the short term, they said.

Recovery depends on fresh liquidity

Despite the sharp fall in turnover, market insiders do not necessarily see the current weakness as a long-term trend.

They said investor interest could gradually return to fundamentally strong and relatively undervalued companies once market uncertainty eases and fresh liquidity begins to enter.

A realistic margin loan framework could also encourage greater participation by institutional and active investors, potentially bringing new funds into the market and strengthening buying pressure.

For now, however, the steep decline in turnover from Tk1,211 crore to Tk507 crore in just 15 trading sessions highlights the extent to which liquidity and investor confidence have weakened in the market.

Textile stocks accounted for the largest share of today's turnover at 25.3%, followed by banks at 13.7% and general insurance at 10.1%.

Fuel stocks posted the highest gain, rising 0.6%, followed by paper at 0.4% and cement at 0.3%.

Ceramic stocks recorded the steepest correction, falling 0.8%, followed by jute at 0.6% and life insurance at 0.5%.

The Chattogram Stock Exchange also closed in negative territory. The CSCX index fell 49.9 points, while the CASPI, the all-share price index, declined 93.9 points.