DSEX erodes 1,015 points, market cap drops over Tk1 lakh crore in FY24
The market capitalisation at the DSE also dropped by over 14% to Tk6.62 lakh crore during the fiscal year that ended on 30 June
Stocks sailed through turbulent waters during the outgoing fiscal year, with the benchmark index of the country's premier bourse eroding 1,015 points, resulting in a loss of more than Tk1 lakh crore in market value.
In the fiscal 2023-24, the DSEX – the prime index of the Dhaka Stock Exchange (DSE) – dropped by 16% to close at 5,328 points, while the blue-chip DS30 fell 282 points to settle at 1,909.
The market capitalisation at the DSE also dropped by over 14% to Tk6.62 lakh crore during the fiscal year that ended on 30 June.
Stockbrokers and market experts say rising interest rates, the imposition of taxes on individual investors' capital gains from listed securities, and a serious confidence crisis due to the regulator's intervention are collectively hurting stock bulls.
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As a result, investors emptied around one lakh BO (beneficiary owner) accounts.
According to the Central Depository Bangladesh Limited (CDBL), in the last fiscal year, the total number of active BOs fell by 84,000, while BOs with share balances dropped by 90,000.
The capital market has struggled with economic uncertainty worsened by the Russia-Ukraine war since its onset. To protect general investors from capital erosion, the Bangladesh Securities and Exchange Commission (BSEC) imposed a floor price in 2022 to prevent share freefalls.
After more than two years, the BSEC lifted the restriction, but the bearish trend continued. In response, the market regulator re-implemented measures to protect investors, including reducing the circuit breaker limit from 10% to 3%.
Abu Ahmed, a former professor of economics at the University of Dhaka, told The Business Standard that interest rates, especially on Treasury bonds, have risen to unprecedented levels recently. "This has led large investors to move their money out of the market and invest in bonds," he added.
He also mentioned that the interest rate on Treasury bonds has remained steady at around 12%. Given that investing here carries no risk, it's a preferred choice for many investors.
The stock market expert further said the market has experienced a fund crisis as a direct consequence, indicating that due to the elevated interest rates, the market is witnessing a decline.
According to him, investors' options for investment have dwindled over the past decade. He noted that the number of reputable companies entering the market has significantly declined. Moreover, among those currently listed, sectors such as banks, insurance, non-bank financial institutions, and manufacturing companies are underperforming.
He added that the lack of good governance has eroded investor confidence in the market and that there's a noticeable absence of long-term policy support aimed at market improvement.
Md Saiful Islam, president of the DSE Brokers Association of Bangladesh, said in a press conference held on 11 June that investors are losing confidence in the stock market due to a combination of factors such as the absence of high-quality initial public offerings (IPOs) and governance issues among all stakeholders, including intermediaries and the regulator.
When asked, DSE Director Shakil Rizvi said that the interest rate of banks has increased significantly in the recent financial year. In addition, there has been a major devaluation of the taka, which has affected the stock market. Apart from this, floor prices and various actions by regulatory bodies create a crisis of confidence among investors.
All in all, investors have had one of the worst fiscal years in years, he said, adding that if there are no more bank rate hikes in the new financial year and the regulator does not take any wrong action, the market may turn around a bit.
