Stock market: Uncertainties, also opportunities

Leaving a challenging year behind, stock market investors are welcoming the new year that still shows multiple uncertainties.

And, they are expected to create good investment opportunities.

Investors will keep an eye on several major factors this year—the Ukraine war, pre-election political situation, balance of payment and exchange rate.

Also how the two restrictions—interest rate caps at banks and the floor price in the stock market— will be withdrawn will be significant for the stock market.

Both factors are adding to uncertainties and caution among investors.

For instance, the war, if prolonged, would keep hurting the global economy and markets, and if it ends early, global energy and commodity prices would further ease from the levels which corrected from the peaks, but are still higher than the pre-war levels.

The war will remain crucial for our balance of payment, foreign exchange reserve and exchange rate. The recession in Europe and slowdown in the USA will not allow our exports to increase that significantly.

Remittance inflow may increase if the central bank makes the exchange rate more lucrative to the expatriate Bangladeshis and if the difference between official and curb market rates of dollar can be minimised.

IMF loans may ease the balance of payment pressure to some extent.

My anticipation is that Taka may depreciate a bit against the US dollar in 2023.

I am not expecting a significant growth in the economy and corporate performance this year as before the national election, investors and companies prefer going slow.

Bangladesh Bank hints removal of the lending rate cap in banks and the higher interest gradually will cool down the demand for nonessential loans, being it for imports, or for consumption. Meanwhile, higher rates should help banks secure more deposits.

If the adjustment begins earlier this year, things should correct in the natural course and the money market may have better liquidity by the end of 2023.

On the other hand, we all know that the stock market does not like high interest rates.

However, the market that has already corrected by 17-18% from the October 2021 peak has enough undervalued stocks, overvalued ones too.

Foreign portfolio investors, mainly due to their anticipated currency risk have been net sellers of Bangladeshi stocks and due to the floor price they are yet to finish their selling in some stocks, while the market already absorbed their selloffs in some other stocks.

With the floor prices removed, their selling would continue in a few good stocks as long as their bearish forecast for our currency is there.

Amid a number of negative factors, the market may face some downward pressure after floor prices are removed. 

The good news is smart money and intelligent investors are there and they come up at a point of price corrections and help the market consolidate or bounce back.

In conclusion, I believe, the stock market in 2023 will give good opportunities to buy good shares at lucrative prices that may generate decent returns by the year end or in the next year.

Mohammad Emran Hasan is the Chief Executive Officer of Shanta Asset Management Ltd

TBS senior Correspondent Mahfuz Ullah Babu talked with Mohammad Emran Hasan