Stocks tumble as investors worry over economic uncertainty
Stock market analysts said the higher policy rate, not overnight but gradually, will slow down the money flow to the capital market.
Indices of both the stock exchanges tumbled in the outgoing week as cautious investors preferred to liquidate their holdings and stay on the sidelines with shaky confidence stemming from intensifying macroeconomic concerns and rising political uncertainties ahead of the national election.
Market insiders said investors might be spooked following the US State Department's announcement of visa restrictions on Bangladeshis who will be found hampering a free and fair national elections here.
Besides, the Bangladesh Bank on Wednesday increased its key policy rate, also known as the repo rate, by 75 basis points to 7.25%, the highest in the last decade.
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Repo rate is the rate at which a country's central bank lends money to commercial banks in the event of any shortfall of funds.
With the recent hike in the repo rate, the borrowing costs for commercial banks from the Bangladesh Bank are set to rise, inevitably leading to an increase in the banks' lending rates. As anticipated, the central bank has already elevated the lending rate for banks to 10.7% as of Thursday.
Stock market analysts said the higher policy rate, not overnight but gradually, will slow down the money flow to the capital market.
Also, an increase in the deposit rate would lead to a shift in money flow from the secondary market to banks as many investors are likely to invest in fixed income deposits rather than in the stock market.
Meanwhile, DSEX, the broad index of the Dhaka Stock Exchange (DSE), lost 22.9 points to settle at 6,262 points.
The Chittagong Stock Exchange (CSE) also ended lower with the CSE All Share Price Index (CASPI) losing 48 points to settle at 18,532.
Conversely, investors' participation in the market inched up as the average market turnover increased by 3.0% to Tk467 crore in the last week.
Out of 362 issues traded, 120 witnessed price fall and 37 saw price surges while 205 issues remained unchanged on the DSE trading floor.
Low-cap companies kept their dominance on the turnover chart, with Sonali Paper & Board Mills being the most-traded stocks, followed by LafargeHolcim, Sea Pearl beach Resorts, Fu-Wang Food and Republic Insurance.
Deshbandhu Polymer was the week's top gainer, rising 32% despite the company recommended a lower dividend to its shareholders for the fiscal year 2022-23. Emerald Oil Industries was the worst loser, shedding 18.80%.
