DSEX plunges amid economic uncertainty

Infographics: TBS

Dhaka stocks plummeted on Tuesday as investors sold off shares amidst economic uncertainties fuelled by high inflation, a record current account deficit, and a decline in forex reserves.

The benchmark index DSEX of the Dhaka Stock Exchange (DSE) dropped by 81 points and settled at 5,586.

Market insiders said this is the most significant decline since the bottom-line circuit breaker limit was adjusted to 3% from 10% on 24 April.

The turnover value at the country's premier bourse also fell over 31% to Tk664 crore from the previous session.

Among the total traded stocks, 31 advanced, 343 declined, and 25 remained unchanged.

Tk7,120 crore was wiped out of the exchange, leaving the DSE market capitalization to settle at Tk7.04 lakh crore.

The managing director of a brokerage firm said regulatory interference was the major reason behind subduing investor confidence.

The Bangladesh Securities and Exchange Commission has reinstated the floor price to mitigate the downward trend in stocks, three months after lifting the previous restrictions.

"So the 3% circuit limit is the main cause for the sudden fall in prices, as traders do not want to be stuck with limited flexibility," he added.

He also said rising inflation and the country's record current account deficit also contributed to the further decline in stocks.

EBL Securities said in its daily market review, the benchmark index of the capital bourse dipped into a 2-week low driven by massive selloffs from jittery investors, owing to the enduring pessimism pervading the trading floor amid subdued market sentiment and concerns over the market outlook.

Sellers remained predominant right from the start of today's session as they were wary of the market's outlook, which led the majority of scrips to get stuck at the revised lower circuit without having sufficient buyers, it added.

Market insiders said the Bangladesh Bureau of Statistics recorded food inflation at 10.22% in April, marking a five-month high, while inflation in the health sector surged to 13.69%. However, overall inflation slightly decreased to 9.74% from March's 9.87%. High inflation will increase household budgets and narrow people's ability to save.

In July-March of FY24, the financial account deficit stood at $9.25 billion, more than three times higher compared to the $2.9 billion in the same period of FY23, according to Bangladesh Bank data released on Monday.

The financial account, which consists of the secondary income of a country – foreign direct investment, short-term and long-term loans, aid, and trade credit – has remained negative for the past two years, compelling the central bank to make foreign payments directly from the reserves.