Stocks snap four-day rally as margin rule uncertainty weighs on investors

The country's equity markets stumbled on Thursday, bringing a sudden halt to a four-day winning streak as investors adopted a cautious stance amid growing uncertainty regarding the legal proceedings surrounding the new Margin Rules.

The Dhaka Stock Exchange (DSE) witnessed a significant correction, with the benchmark index giving up some of the gains accumulated earlier in the week.

The DSEX, the broad-based index of the Dhaka bourse, dropped 32 points to close the week at 4,869. The decline was reflected across the board, with the blue-chip DS30 index plummeting by 15 points to settle at 1,877.

Market participation was mixed but ultimately skewed towards selling pressure; out of the traded issues, 238 declined, 104 advanced, and 29 remained unchanged.

Despite the fall in indices, total turnover on the Dhaka bourse saw a slight increase, rising to Tk445 crore.

EBL Securities, in its daily market review, noted that the capital bourse witnessed a pause in its recovery trend during the final session of the week.

The brokerage firm observed that cautious investors chose to lock in recent gains and adopted a "wait-and-see" strategy. This hesitation stems largely from the ambiguity regarding the market's momentum surrounding the forthcoming legal proceedings on margin rules.

Prior to Thursday's correction, the DSEX had gained 199 points over four consecutive sessions, signalling a notable shift from a month-long slump that had weighed heavily on investor sentiment.

However, legal complications have introduced a new layer of volatility. The High Court had earlier addressed a writ petition regarding forced selling from leveraged accounts. The petition, filed on 9 November by investors SM Iqbal Hossain, Md Saidur Rahman, SM Fakrul Islam, and Mohammad Selim, challenges the validity of the new margin rules.

On 11 November, a High Court bench comprising Justice Fahmida Quader and Justice Md Ashif Hasan rejected a plea for a stay order on the rules. However, the court issued a rule asking the government and the Bangladesh Securities and Exchange Commission (BSEC) to explain within seven days why certain sections of the Margin Rules, 2025, should not be declared unconstitutional.

A writ petitioner, speaking to TBS on condition of anonymity, stated that they have already sent the High Court rule to the responders. Following their response, the next hearing is anticipated to take place either next Monday or Tuesday.

On the sectoral front, the Textile sector dominated trading, contributing 13.0% of the total turnover, followed closely by Fuel & Power at 12.4% and Pharmaceuticals at 11.7%.

Turnover leaders included Anwar Galvanizing, Baraka Patenga Power, Square Pharma, Summit Alliance Port, and Simtex Industries.

In terms of returns, almost all major sectors displayed dismal performance. The Jute sector faced the hardest hit, correcting by 3.8%, followed by Life Insurance at 3.6% and Travel at 2.9%. Only the Services and Textile sectors managed to exhibit marginal positive returns of 0.9% and 0.3%, respectively.

Interestingly, loss-making firms dominated the gainers' list, indicating speculative trading behaviour. FAS Finance, Keya Cosmetic, International Leasing, CNA Textile, and National Bank all saw their share prices surge by approximately 10%.

Conversely, Simtex Industries was the top loser, shedding 9.83%, followed by Pragati Life Insurance and Prime Textile.

The trend was similar at the port city bourse. The Chattogram Stock Exchange's CSCX index ended 13 points lower at 8,418, while the CASPI inched up slightly to 13,642. Turnover at the CSE stood at Tk7.38 crore.