Stocks roaring with Bangladesh

Infographic: TBS

Nothing lasts forever, whether it's optimism or pessimism.

The stock market, long governed by radical wishes instead of its rules and norms, appears to be feeling liberated after the political change came through Sheikh Hasina's resignation as prime minister after one and a half decades.

With the falling undervalued blue-chip stocks' sharp reversal, DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), surged by 13.3% in three trading sessions to close at a 4.5-month high of 5,924.

"The upward rally in the country's capital market continues as the relentless buying spree remains prevalent across the trading floor, riding on the rebounded optimism owing to positive expectations over the recent changes in the country's political environment," said EBL Securities in its daily market commentary on Thursday.  

"Even in the last week, I did not imagine the unfolding strength of the stock market, just like the political events we have come through this week," Razzak, a corporate executive and a retail investor in Dhaka, told The Business Standard on Thursday.

"The fundamental performance of the economy and listed companies did not change overnight, but investors' optimism for a better future drove the sharp market reversal." 

Asif Khan, President, CFA Society Bangladesh 

"We are all feeling like it is a new Bangladesh where there are no police on the streets and the student volunteers are controlling traffic in a better way. In the stock market, the regulator is not interfering in the name of helping small investors, and still, investors themselves are taking care of the market in a stronger way," he said.

His equity capital was more than halved in the past six-seven months amid a freefall of blue-chip shares, and he was praying for a miracle, blaming the radical market control mechanism – like the floor price, the imposition of which deprived him of exit opportunities since August 2022—and later, a sudden withdrawal of the floor earlier this year was about to devastate the account.

He was holding onto the investments and now has a large portion of the unrealised losses recovered.

Analysts said the intensifying pessimism in the past few months was hitting the market harder amid a blurry outlook of inflation, interest rates, economic performance, and most importantly, the economic management of the nation.  

With the news of Nobel laureate Professor Muhammad Yunus, taking over as the head of the interim government, the sentiment completely reversed.

Market intermediaries, when being verbally dictated by the regulator to keep buying stocks in the past few years, had been reluctant, citing their shortage of funds that could be freshly injected.

With market confidence back, it seems to have been merely an excuse, said the CEO of a top-tier brokerage firm.

Institutions, high-net-worth individuals, and retail investors are now chasing the momentum as the national optimism for a free, fair, and rational society touches them too.

The roaring bulls 

At the extreme of the tensions regarding the student uprising earlier this week, over 300 of the 400 DSE scrips saw no interested buyer at the lowest allowable prices.

In the past three sessions, an increasing number of scrips have been found to hit their top circuits for the day. On Thursday, 127 scrips closed without any sell offer at the allowable maximum price as they expected further runs.

Trading turnover, which shrank to less than Tk208 crore in the DSE, surged to over Tk1,600 crore on Thursday.

DSEX, with increasing momentum for the past three days, rose by 5.45% on Thursday, 3.54% on Wednesday, and 3.8% on Tuesday.

"The indices maintained an upward trajectory with increased market participation throughout the session, as most scrips saw significant price appreciation driven by investors perceiving attractive investment opportunities amid the sustained uptrend," wrote EBL Securities.

On the sectoral front, pharmaceuticals contributed the maximum 23.7% to the daily turnover in the DSE, followed by the banking and food sectors.

No sector saw a decline in market capitalization. The telecommunications sector, with Grameenphone, Robi, and Bangladesh Submarine Cable Company shares hitting the top circuit, rose by 9%, followed by non-bank financial institutions and banks.

DSE market capitalisation, which is the total market value of all the listed securities, rose by more than Tk58,000 crore in the past three days, of which Tk25,000 crore surged on Thursday, according to the DSE.

Out of the 397 stocks and mutual funds traded, 364 advanced, 27 declined, and 7 remained unchanged.

Meanwhile, CSCX, the broad-based index of the Chittagong Stock Exchange, surged by 5.4% to 10,132 on Thursday.
 
What is next?

"Many of the blue-chip stocks were too undervalued in June-July," said Edge Asset Management Chairman Asif Khan, adding, "Yet, investors were not making their stock bets bigger amid the high inflation, interest rates, and a lack of confidence."

"The fundamental performance of the economy and listed companies did not change overnight, but investors' optimism for a better future drove the sharp market reversal," he told TBS on Thursday.

The question of sustaining momentum will be answered by the extent of fulfilment of expectations from the new interim government, in terms of ensuring sustainable reforms and good governance, added Asif Khan, who is also the president of CFA Society Bangladesh, the largest community of Bangladeshi investment professionals.