Stocks hit 6-week low on second straight day of sell-offs

Infographic: TBS

On the second consecutive day of sharp sell-offs, the major equity index of the Dhaka bourse fell to a six-week low as investors preferred not to increase their exposure to the ongoing market volatility. 

Following the 0.21% fall on Thursday, DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), fell by 0.22% to 6,315 on Sunday which was the lowest since 25 June. 

Stockbrokers blamed the increased political tension, rising interest rates and the market illiquidity amid a majority of stocks having no trading due to the floor price.

"There also had been a considerable decrease in market participation as sell-offs continued across the trading floor since cautious investors preferred to remain on the sidelines owing to the prevailing volatility in the market," said EBL Securities in its daily market commentary.

On Sunday, turnover in the premier bourse fell to a nearly four-month low of Tk418 crore — 14% lower compared to the previous session. 

Food, general insurance, and textile sectors together accounted for around 45% of the DSE turnover while only tannery and general insurance sectors saw their market capitalisations inch up by 0.7% and 0.4% respectively. 

On the other hand, IT, cement, and services sectors led the corrections with 1.5%, 1.3% and 0.9% fall, respectively. 

Out of all the DSE scrips, 39 advanced, 132 declined and 221 remained unchanged. The large cap stocks that were above floor price were in heavier sell pressure and that was why Dhaka bourse's blue chip index DS30 underperformed other indices with a 0.39% fall on Sunday. 

On Sunday, 229 of the DSE scrips were stuck on the floor prices, even after a year of the price restriction mechanism. 172 scrips were trading above the floor. 

Analysts said many of the fundamentally sound stocks, with a long term proven track record to generate wealth for investors, were at reasonable prices. Only because of the floor prices, many investors were refraining from buying the stocks as there is a perceived risk of getting capital stuck. 

In the meantime, many small and mid-cap stocks, having in and out flows of short term trading capital, were moving and shaking the market over the last one year under floor price. 

Excessive speculation, manipulation allegations, continuation of capital erosion or zero-reward holding on to investments were frustrating investors, said stockbrokers. 

Central Depository Bangladesh Ltd data suggests, at the end of July there had been shares only in 13.89 lakh beneficiary owner (BO) accounts, down from 13.95 lakh a month ago. The number of active investors in the stock market declined by around 85,000 in the last 13 months. 

Turnover in the Chittagong Stock Exchange, on Sunday, dropped by 78% to Tk3.9 crore while no index at the port city bourse managed to stay afloat amid the selling pressure.