DSEX records steepest fall among regional peers in August
Bangladesh’s benchmark index fell sharply amid an energy crisis, regulatory uncertainty and weak investor participation, while most regional markets posted gains.
Bangladesh's benchmark stock index significantly underperformed its regional peers in August, posting the second-worst return among the tracked markets.
According to the "Monthly Market Wrap" for August by Sheltech Brokerage Limited, the DSEX declined 297 points, or 5.05% month-on-month, to 5,598, snapping a four-month winning streak.
Among eight tracked regional markets, only Thailand's SET Index performed worse, declining 1.75%, while India's S&P BSE Sensex fell 1.46%.
By contrast, Vietnam's VN-Index gained 5.01%, Indonesia's IDX Composite rose 4.64%, Sri Lanka's ASPI advanced 0.99%, Pakistan's KSE 100 increased 0.50%, and Malaysia's FTSE Bursa Malaysia KLCI edged up 0.06%.
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The sharp divergence highlights the weakness of Bangladesh's market compared with most regional peers during the month.
DSEX falls as energy crisis overshadows reforms
Sheltech Brokerage said in its report, the DSEX's performance was primarily shaped by the energy supply crisis, uncertainty surrounding the finalisation of margin rule amendments and reports of heightened regulatory oversight.
The market initially witnessed a tug-of-war between buying and selling interest as investors assessed the energy crisis and awaited clarity on the proposed margin rule changes. This came despite Bangladesh Bank's decision to reduce the policy rate by 50 basis points, which was expected to provide some support to economic activity and liquidity, it added.
The margin rule amendment was eventually finalised in the middle of the month, offering greater flexibility to investors. However, the regulatory development failed to reverse the market's downward trajectory, read the report.
Selling pressure persisted as concerns over the energy crisis intensified, particularly over its potential impact on industrial production, corporate earnings and the broader economy. Media reports suggesting possible regulatory tightening further unsettled investors, said Sheltech Brokerage.
"Although subsequent regulatory clarification denied some of the reported potential measures, investor confidence remained weak. Selling pressure intensified toward the end of August, pushing the DSEX to an approximately two-month low."
At the same time, trading activity deteriorated sharply. Average daily turnover fell 30.16% month-on-month to Tk876 crore, while market breadth declined, reflecting broad-based selling pressure amid subdued participation.
Market insiders said retail investors remained the most active participants during the downturn, particularly on the selling side. Foreign investors were also more active in selling than buying, while institutional investors were mostly on the buying side during sessions when the DSEX declined.
The weakness was particularly evident among large-cap stocks. While gains remained concentrated in a handful of Z-category and mid-cap companies, broad-based weakness in large-cap shares exerted significant pressure on the benchmark index. The market's sectoral performance was also overwhelmingly negative.
Almost all sectors posted negative returns during the month. IT led the decline with a 9.94% fall, followed by mutual funds at 9.56%, cement at 9.08%, ceramics at 8.37% and non-bank financial institutions at 8.36%.
The monthly gainers' list was led by Tung Hai Knitting, whose share price rose 53.57%, followed by GBB Power with a 50% gain and Saiham Textile with 43.09%. Nitol Insurance and Alltex Industries gained 25.56% and 19.61%, respectively.
On the other hand, FAR Chemical suffered the steepest decline among the major losers, falling 32.79%. Sharp Industries dropped 31.91%, ML Dyeing 26.97%, AIBL First Mutual Fund 26.15% and Sunlife Insurance 25.65%.
Investors await energy relief, earnings catalysts
The market's August performance stands in sharp contrast to the gains recorded by most regional peers, raising concerns over the domestic market's ability to attract fresh investment amid persistent economic challenges.
Sheltech Brokerage said the energy crisis has emerged as a particularly important concern because prolonged shortages can disrupt factory operations, reduce capacity utilisation and eventually weaken corporate earnings. Investors are therefore closely watching developments in energy supply and their impact on businesses.
"The upcoming earnings and dividend announcements from companies with June year-end financial periods are also expected to influence market direction in the near term."
According to Sheltech Brokerage, investors will likely assess whether renewed buying interest can emerge and help the DSEX defend its 5,527–5,643-point support zone.
The market's ability to hold this range could be important in determining whether the recent correction stabilises or extends further.
Meanwhile, the combination of regulatory reforms and weak investor sentiment presents a mixed picture. The finalisation of the margin rules removed some uncertainty, while monetary easing offered another potential positive catalyst. Yet these measures have so far failed to outweigh concerns surrounding energy supply and the broader economic outlook, said Sheltech Brokerage.
