Post-budget stocks lost Tk12,600 crore market cap in two days

The stock market experienced a significant decline following the announcement of the 2024-25 national budget, with stocks losing a staggering Tk12,600 crore in market capitalisation over just two days. 

This sharp drop reflects investor concerns and market reactions to the new fiscal policies and economic measures introduced in the budget, according to the market insiders.

The key index DSEX of the Dhaka Stock Exchange (DSE) plunged by 65 points to settle at 5,105 today, extending the losing trend for two days.

The benchmark index came down to a lowest level since 4 April 2021, which was at 5,088 points on that date.

Besides, the blue-chip index DS30 also dropped by 23 points today to close at 1,811, lowest since 2020.

The port city bourse, Chittagong Stock Exchange, also settled in the red terrain. The selected indices CSCX fell by 96 points to 8,827, and the all-share price index CASPI dropped by 162 points to close at 14,678 on the day.

EBL Securities, in its daily market commentary, said the relentless bearish spell on the country's capital bourse continues amid lower market participation, resulting from the enduring pessimism pervading the trading floor due to dampened investor sentiment amidst an uncertain market outlook.

Sellers continued to remain predominant across the trading floor as jittery investors opted to sell off their holdings to avoid further capital erosion in their already hampered portfolio, it cited in the report.

Investors shy away from taking positions in equities that cause the majority of scrips to turn into falling knives and be stuck at the lower circuit without having sufficient buyers, it added.

The capital market has struggled with economic uncertainty worsened by the Russia-Ukraine war since its onset. To protect general investors from capital erosion, the Bangladesh Securities and Exchange Commission (BSEC) imposed a floor price in 2022 to prevent share freefalls.

After more than two years, the BSEC lifted the restriction, but the bearish trend continued, causing the DSEX to plunge over 1,200 points by 10 June. As a result, market capitalisation dropped by around Tk1.50 lakh crore during this period and due to the prolonged downturn, around one lakh investors emptied their BOs.

In response, the BSEC re-implemented measures to protect investors, including reducing the circuit breaker limit from 10% to 3%.

Stockbrokers and market experts said several negative factors are contributing to this decline. The rising interest rates, imposition of taxes on individual investors' capital gains from listed securities, subdued corporate earnings, and a serious confidence crisis due to the regulator's intervention are collectively hurting stock bulls, they added.

In the FY25 budget, Finance Minister AH Mahmood Ali proposed a 15% tax on individual investors' capital gains exceeding Tk50 lakh from listed securities, at a time when the country's investor-dominated stock market was experiencing a free fall.

Capital market stakeholders have urged the government to refrain from this move, citing its panic-inducing effect on an already fragile market.

According to BSEC sources, the chairman of the securities regulator met with the chairman of the revenue board on Sunday to request the withdrawal of the capital gains tax, considering the market's downward situation.

However, Abu Hena Md Rahmatul Muneem, chairman of the National Board of Revenue, emphasised in a post-budget press conference that taxation was not the root cause of the capital market's issues, despite longstanding tax incentives not fostering market growth.

At an event organised by the Bangladesh Securities and Exchange Commission (BSEC) on 22 May, Financial Institutions Division (FID) Secretary Md Abdur Rahman Khan stated that investors are mainly discouraged from the stock market by non-fundamental companies that entered the market with manipulated financial results.

"Many companies entered the stock market with manipulated financial health. But after that, they did not pay healthy dividends as their real health got revealed," he added.