Dhaka stocks sink to lowest in four years

The major equity index of the Dhaka bourse fell by 3% today (7 May), the sharpest in more than 49 months.

With only nine gainers against 385 losers, the broad-based index of the Dhaka Stock Exchange (DSE), closed 149 points lower at 4,802, the lowest since 23 November 2020.

Stockbrokers said the market was already weak amid poor confidence and the absence of any trigger for a turnaround.

Investors, coming through the economic pains of the Ukraine war, showed further sensitivity about the geopolitical tension in the subcontinent, especially when investors' community groups in social media were panicked about the risks of any nuclear warfare, they added.

"Investor sentiment was severely shaken by fears of geopolitical uncertainty, prompting many to liquidate their holdings," said Ashiqur Rahman, managing director (MD) of Midway Securities.

"Which is hurting the stock market most – the Bangladesh economy, the regulator-market disconnect or the geopolitical tension between India and Pakistan?" Kazi Ashif, a stock investor in the capital, questioned while talking to TBS.

"Stocks are bleeding at unexpected lows and we see no supportive move by the regulator or the government," he said, echoing many retail investors.

Chief Adviser Muhammad Yunus today called a meeting scheduled for Sunday with the finance adviser, special assistant for finance, secretary of the Financial Institutions Division and the chairman of the Bangladesh Securities and Exchange Commission.

The economy

"We hope the central bank will be successful in lowering interest rates in line with the expected fall in inflation. In that case, the money flow will be stronger in the second half of the year. However, the risk of rates surging to a higher high cannot be fully eliminated from our analysis," Ekush Wealth Management MD Kazi Ahsan Maruf recently told TBS.

Stock market tends to perform poorly when interest rates are high, he said.

However, the blue chip stocks' abnormal low price should attract contrarian investors who ignore market conditions and grab long-term opportunities, he said, echoing other chartered financial analysts.

The economy, from an intensive care unit last year started to rebound and with the other problems within the stock market resolved through the reform initiatives should help the market, Chief Adviser's Special Assistant for Finance Anisuzzaman Chowdhury told in a press conference last week.

"Investors never faced such a directionless situation," said DSE Brokers Association President Saiful Islam, blaming the economic uncertainties alongside the ongoing disconnect between the market players and regulator.

Tension between market players and regulator

"The regulator seems indifferent about what the market needs and it is a standstill picture while investors look for direction and growth," the DSE Brokers Association president said, mentioning no capital raising through initial public offers (IPO) this year, no trigger in investment decisions within boardrooms and trading rooms.

The reorganised commission at the securities regulator after the political changeover imposed a record cumulative fine of around Tk1,000 crore on market players for manipulations, alongside hitting hard the regulatory officials alleged for collaborating over a decade of the ill governance in the capital market during Awami League.

Stock market people have been blaming the regulator for confronting the large investors and its own employees that led to a series of protests demanding resignation of BSEC Chairman Knondoker Rashed Maqsood.  

"Stock market is going through a cleaning phase and any cleaning process is painful," Anisuzzaman Chowdhury said last week, announcing no artificial market support, no removal of the BSEC chairman bowing to popular demands.

Meanwhile, a group of market players and retail investors, in the past several weeks, have been speculating on resignation of the BSEC chairman that raised expectations for a slack in regulatory supervision in market trading that might allow the de facto market makers resume playing.

A rumour that the BSEC chairman, who was traveling abroad to participate in several events to represent his organisation, might not return to the post again sparked a short buying spree in the last session of April. However, this quickly faded before yesterday's closing bell when investors learned that he was invited in the meeting with the chief adviser.

Pro governance market professionals, however, do not blame the BSEC chairman for the sorry state of the stock market as they believe that the market is facing the consequence of wrong moves and poor governance over the past one decade.

Some instead, say, the market manipulators are trying to get rid of the BSEC chairman to save themselves from the regulatory actions.

Anisuzzaman Chowdhury said some of the recent fall was due to fundamental factors while the government suspects there were manipulative attempts too.

The situation is not healthy for the market as it needs harmonic efforts by the government, the regulator, the intermediaries and the investors to function properly, said Brokers Association President Saiful Islam.

The most unfortunate part is the stock market is being beaten by almost everything while other markets absorb shocks and rebound, he added.  

For instance, he said, the Ukrainian stock market had recovered during the war, not the Bangladesh market.

Saiful said, "Even Indian major index S&P BSE Sensex inched up by 0.13% on Wednesday. Pakistani equity index KSE 100 fell by more than 5% in the morning and value investors pushed them up to end the day with a 3.1% fall.

"The broader market fundamentals are not strong enough in Bangladesh as half of the companies are being considered junk in rigorous screening of value investors."

Chartered Financial Analyst Md Moniruzzaman, MD and CEO of Prime Bank Securities, said like listing enough good companies, the Bangladesh stock market failed to create a strong base of value investors who ignore psychological barriers and invest in long term opportunities that is strongly prevailing in many blue chip stocks in the DSE.

Other markets, including India and Pakistan, have a great pool of institutional investors who absorb excessive supplies during panic, he added.