Dhaka stocks plunge as US strikes on Iran rattle investors

The Dhaka Stock Exchange (DSE) suffered a sharp decline today as rising tensions in the Middle East following US airstrikes on Iran deepened global uncertainty and spooked investors.

The benchmark DSEX index fell 76 points to close at 4,677, while the blue-chip DS30 index shed 23 points, ending the session at 1,758. Of the issues traded, only 16 advanced, 365 declined, and 16 remained unchanged.

Meanwhile, trading activities remained stagnant as most investors shied away from taking positions in equities, causing the total turnover on the DSE to fall to a low of Tk271 crore.

The port city bourse, CSE, also settled in a negative zone. The Selective Categories' Index (CSCX) and All Share Price Index (CASPI) declined by 97.2 points and 171.5 points, respectively. 

The market downturn came as the US airstrikes escalated tensions across the Middle East.

US President Donald Trump announced that the strikes had "obliterated" key Iranian nuclear facilities. About an hour after the US strikes, Israel came under a missile barrage, with Iran warning that it reserves "all options" to defend itself. 

"The events this morning are outrageous and will have everlasting consequences," said Iranian Foreign Minister Abbas, describing the US strikes as a "grave violation" of the UN Charter, international law, and the Nuclear Non‑Proliferation Treaty.

Saiful Islam, president of the DSE Brokers Association, told TBS that the US airstrikes on Iran came at a very unfortunate time, deepening tensions in the Middle East. According to him, this caused panic among investors and intensified selling pressure from the very start of the trading day.

"We've already suffered due to the Russia-Ukraine war, and we're still grappling with its effects. If tensions in the Middle East escalate, it will undoubtedly hurt our economy as well, and this is why investors are panicking," he said.

Mohammad Rehan Kabir, head of research at EBL Securities, said, "Our market tends to be highly reactive to geopolitical tensions, and Sunday's market drop was largely a reaction to the US attack on Iran."

He explained that the market had been gaining strength recently due to several positive developments – including political consensus around the national election, signs of economic recovery, easing liquidity shortages in the banking sector, and strong budgetary support for the capital market – all of which boosted investor sentiment. However, despite the sharp fall triggered by geopolitical tensions, Kabir believes the impact will be temporary.

EBL Securities in its daily market review said the capital market of the country suffered the outrage of dominant selling pressure as deepening global tensions, triggered by US airstrikes on Iran, rattled investors and prompted them to liquidate holdings to avoid further capital erosions in their already hampered portfolios, leaving the market mired in persistent uncertainty.

The market opened lower, with sellers being predominant across the trading floor as unnerved investors opted for trimming their exposure to capital market investments amid heightened concerns over the market's momentum, it added.

On the sectoral front, food issues exerted the highest turnover as it contributed 22.1% to the DSE turnover, which was followed by the bank and pharma sectors.

Lovello Ice-cream led the turnover chart with its shares worth Tk19.61 crore changing hands. It was followed by Beach Hatchery, BRAC Bank and Square Pharma.

All sectors posted dismal returns, with the paper, non-bank financial institutions (NBFI), and ceramic sectors leading the corrections on the bourse. The NBFI sector was hit hardest after the Bangladesh Bank recently issued show-cause notices to 20 institutions, seeking an explanation as to why their licences should not be cancelled.

The 20 NBFIs – CVC Finance, Bay Leasing, Islamic Finance, Meridian Finance, GSP Finance, Hajj Finance, National Finance, IIDFC, Premier Leasing, Prime Finance, Uttara Finance, Aviva Finance, Phoenix Finance, Peoples Leasing, First Finance, Union Capital, International Leasing, BIFC, Fareast Finance, and FAS Finance – have been identified as having high levels of defaulted loans and an inability to repay depositors' funds.

They have been asked to respond within 15 working days, according to central bank officials who spoke on condition of anonymity. The officials added that appropriate action, including potential mergers or liquidation, would be taken after assessing their responses.

According to Bangladesh Bank data, as of December last year, total defaulted loans at 35 NBFIs amounted to Tk25,089 crore, representing 33.25% of their total disbursed loans. Of these institutions, 12 accounted for roughly 73.5% of the sector's total bad loans. Besides, more than 90% of loans at seven of them were classified as defaulted.