DSEX snaps three-week gaining streak as foreign, institutional investors lead sell-off

The Dhaka Stock Exchange (DSE) ended its three-week gaining streak last week as heavy selling by foreign and institutional investors, coupled with regulatory uncertainty and renewed Middle East tensions, dampened investor sentiment.

Analysts said the Bangladesh Securities and Exchange Commission's (BSEC) proposed changes to margin lending rules prompted major investors to cut exposure.

The benchmark DSEX index fell 96 points, or 1.63%, to 5,804.30, while average daily turnover dropped 28% to Tk1,063 crore from Tk1,474 crore the previous week.

Foreign, institutional investors lead sell-off

DSE data showed foreign and institutional investors remained net sellers throughout the week.

On 21 July, foreign investors accounted for 3.31% of total turnover on the sell side against just 0.23% on the buy side. By the final session on 23 July, foreign buying had dropped to zero, while selling stood at 2.45%.

Institutional investors also sold more than they bought in three of the five sessions, with selling peaking at 10.18% of daily turnover on 21 July.

Retail investors remained the market's biggest buyers, accounting for nearly 90% of purchases, though they also sold shares as the market weakened.

Insurance stocks tumble on margin rule proposal

The main trigger for the decline was the BSEC's draft proposal to tighten margin lending rules, particularly by excluding several insurance stocks from margin loan eligibility, sparking a broad sell-off in the sector.

According to EBL Securities, investors reacted negatively from the week's opening session. Although speculation over possible regulatory easing briefly stabilised the market midweek, the recovery was short-lived.

Sheltech Brokerage said buying interest emerged in December-closing stocks ahead of the earnings season but lacked the strength to sustain a rebound.

General insurance stocks fell 7.4%, and life insurance shares lost 5.4%, making insurance the week's worst-performing sector. Meghna Insurance dropped 13.5%, Global Insurance 12.4%, and Standard Insurance 12.2%.

Mutual funds buck the trend

Mutual funds were the week's top-performing sector, gaining 9.3% after regulators allowed funds to retain unrealised gains instead of distributing them as cash dividends, a move seen as strengthening their financial position.

MBL First Mutual Fund surged 47.8%, while NCCBL Mutual Fund One and Green Delta Mutual Fund each gained 25%.

The non-bank financial institution (NBFI) sector also rose 2%, led by Fareast Finance, up 41.7%, and FAS Finance, which gained 38.5%.