Stocks rally continues for 3 weeks as investors turn active

Illustration: TBS

Dhaka-Chattogram stocks, resuming their rally on Thursday, closed higher to end their third consecutive winning week as investors, who were inactive for months amid confusions about the economy and the direction of the stock prices, became active again recently.

DSEX, the broad-based index of the Dhaka Stock Exchange, closed at 6,325 on Thursday, the highest since the second week of November while average daily turnover in the premier bourse was up by one-fourth to Tk917 crore last week. 

The bulls were coming back with the gradually unfolding vibrancy in the market that has been offering a lot of short-term gains from the recovering stocks since the second week of April, said stockbrokers and analysts.  

The economy has been performing better than the sceptic investors thought, they said, adding when investors found too many stocks at the oversold price zones, including some fundamentally undervalued shares stuck at the floor prices, they increased their bets anticipating a decent dividend income or an increasing fund inflow into the stocks that leads to capital gain.

Akramul Alam, head of research at brokerage firm Royal Capital, recently told TBS the average price-to-earnings ratio of the market was at around 14 which is considered as a lucrative price level for the overall market in the Bangladesh market. 

Price to earnings ratio conceptually refers to the number of years an investor needs to get back the invested sum out of corporate profits alone and the lower the ratio the cheaper the stock is considered.

The Capital Market Stabilisation Fund built out of unclaimed dividends within the listed firms has announced that it will disburse Tk250 crore among the capital market intermediaries to invest in stocks while most of the stock dealers, and merchant banks were bleeding over months due to the bearish, dull secondary market for months. 

Also, the Bangladesh Securities and Exchange Commission extended a margin loan facility for fundamentally sound and stable stocks. 

Meanwhile, there has been increasing anticipation that high-net-worth individual taxpayers would invest in the capital market for income tax rebates. 

During the last closing bell of the week, 182 scrips had been above the floor prices, roughly up by 100 in the last four-five months.

However, blue-chip and most large-cap stocks were underperforming their small and mid-cap peers and the Dhaka bourse's blue-chip index DS30 was 0.15% up to 2,198 last week while the broad-based index DSEX was up by 0.56%, fuelled by the capital appreciation in a large number of small and mid-cap stocks. 

The insurance sector has been running the show over the last two weeks while many troubled company shares were rallying fast from the recent bottoms. 

Last week 118 DSE scrips advanced while 69 declined.

Jute, life insurance, travel and leisure, general insurance, cement, bank and food were the biggest winners, while only ceramic, textile and IT stocks had some price correction last week. 

CSCX, the major index of the Chittagong Stock Exchange was up by 0.51% to 11,151 points last week, while the blue-chip index CSE30 was down by 0.28%.