Election uncertainty grips stocks, turnover hits 9-month low

Infographic: TBS

Country's bourses, already bleak due to the floor price mechanism, experienced a substantial decline in market participation on Wednesday as investors refrained from pouring fresh funds into stocks over uncertainty about the upcoming national election. 

At the premier bourse Dhaka Stock Exchange (DSE), the daily turnover declined 43% in a day to Tk292 crore—the lowest since 28 March 2023. 

The port city bourse Chittagong Stock Exchange (CSE) also saw a 40% drop in turnover to Tk3.88 crore, compared to the previous session. 

However, indices at the bourses inched up on Wednesday. The DSE's benchmark index DSEX advanced 2.65 points to reach 6,236, blue-chip DS30 gained 2.23 points to 2,092, and CSE's all-share price index CASPI gained 17 points to reach 18,503. 

The market witnessed mild volatility throughout Wednesday's trade as most investors remained wary of the market momentum amid wavering confidence across the trading floor, EBL Securities wrote in its daily market commentary. 

Investors are being observant and staying on the sidelines as they are taking a wait-and-see approach ahead of the impending national election, the commentary reads.

General insurance, pharmaceutical, and engineering sectors contributed the highest 14.5%, 12%, and 11.3% respectively to the day's turnover. 

Standard Insurance was the most traded stock at the DSE on Wednesday, followed by Sea Pearl Beach Resort and BD Thai Food.

The sectors exhibited mixed returns with travel gaining the highest 1.7%, miscellaneous gaining 1%, and services gaining 0.5% market capitalisation. 

On the other hand, mutual funds, general and life insurance stocks saw the highest corrections of 1.1%, 0.8%, and 0.5% in that order. 
Western Marine Shipyard was the top gainer with a 7.89% price appreciation to Tk12.30 per share, followed by Olympic Accessories and Central Pharmaceuticals while mutual funds dominated the losers' table at the DSE.

Out of the 392 issues traded, 56 advanced, 92 declined and 244 remained unchanged.

Brokers concerned over floor price

At present, more than 60% shares are stuck at floor prices, leading to a lack of buyers and sellers of these shares. 

In a meeting with the Bangladesh Securities and Exchange Commission (BSEC) held on Wednesday, top officials at brokerage firms expressed their concerns over the floor price mechanism to the commission. 

One of the officials at a brokerage house who was also a participant at the meeting said the market turnover has decreased at an alarming rate since the imposition of this floor price nearly two years ago. 

"This has led to a decline in transactions, ultimately slashing the income of brokerage houses. Many are struggling to meet even the minimum office expenses."

A lack of buyers and sellers has created illiquidity in the stock market. Also, many investors fell into trouble with their margin loans as they cannot sell the shares. This has created a lack of confidence among investors, the official added. 

Another meeting participant and the managing director of another brokerage firm said the stock market lacks good companies because of a lack of proper initiative at the government level. This has made the market unsuitable for long-term investments. 

BSEC Commissioner Dr Shaikh Shamsuddin Ahmed told TBS, "We wanted to know about the current market conditions and the brokers' experiences in the meeting. They have made several demands to improve the condition of the stock market and we have heard them."

"Most of them raised concerns about the floor price as they're facing problems as institutions. But the floor price won't be there for life," he added.

BSEC spokesperson Rezaul Karim said "The condition of the stock market will improve after the national election. Then a lot of investment will come. We asked the brokers to work for proper stewardship of this investment. If the market is good, there will be no crisis of confidence."