Stocks slip amid taka depreciation fears as BB shifts to market-based forex rate
Among the traded stocks, 61 advanced, while 292 declined and 46 remained unchanged
The benchmark DSEX index of the Dhaka Stock Exchange (DSE) slumped further on Wednesday (14 May) as investor sentiment was rattled by fears of taka depreciation following the central bank's move to adopt a market-based exchange rate.
The DSEX dropped 38 points, or 0.79%, to close at 4,835, marking its second straight session of decline. The blue-chip DS30 index also shed 7 points to finish at 1,791.
Turnover fell by 14% to Tk294 crore, reflecting cautious investor activity. Of the 399 scrips traded, 292 declined, 61 advanced, and 46 remained unchanged.
Meanwhile, the Chittagong Stock Exchange (CSE) also ended the session in the red. The selective index CSCX fell by 38 points to close at 8,322, while the all-share price index CASPI dropped by 71 points to settle at 13,614.
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On the day, investor concerns were triggered after the Bangladesh Bank Governor Ahsan H Mansur announced a managed floating exchange rate starting Wednesday, to meet conditions set by the International Monetary Fund (IMF) to get loan confirmation.
"Bangladesh will receive a total $3.5 billion by June from different donor agencies, including the WB, ADB and IMF," said the governor at a press conference held at the central bank headquarters.
The governor said he hoped that the exchange rate will be around the existing rate due to sufficient dollar liquidity, adding that banks have already been informed about the exchange rates at the day's meeting.
He further said the central bank will intervene in case of large foreign payments to keep the rate stable. There will be a band exchange rate which will not be disclosed, the governor added.
Md Moniruzzaman, managing director and CEO of Prime Bank Securities, told The Business Standard that while the shift to a market-based exchange rate may eventually lead to taka's depreciation, the economic impact will take time to fully unfold.
"Since the exchange rate has been made market-based after a long time, there is a prevailing fear of taka depreciation.
"If taka weakens, import costs will rise, which could further drive up the prices of goods. This, in turn, may negatively affect investor sentiment."
Meanwhile, EBL Securities, in its daily market commentary, said the capital bourse of the country continued witnessing lackluster trading sessions, with the benchmark index plunging further to deepen its bearish headwinds as investors exacerbated bearish sentiment pervading further across the trading floor.
Despite a brief spell of buying interest in the early trading session, the benchmark index gradually succumbed to the selling spree later in the session as investors continued to offload their holdings to limit further losses and shifted to the sidelines amid the absence of strong positive catalysts to revive the market momentum, it added.
On the sectoral front, bank issues exerted the highest turnover, followed by food and mutual fund sectors.
All the sectors, except paper, ended in red, out of which ceramic, travel and services exhibited the most negative returns on the bourse.
