Stocks dip to 18-month low

Dhaka stocks have been in the red for the last three consecutive days with the benchmark index hitting a one-and-a-half year low yesterday.

Industry insiders say some traders are causing the nosedive to press home their demand ahead of the national elections due year-end. The DSEX, the benchmark index of the Dhaka Stock Exchange, fell 49.24 points, or 0.92 percent, before finishing the day at 5,273.16.

The bearish mood continued even after the government has taken steps to boost the market.

In a letter last month, Finance Minister AMA Muhith instructed the Bangladesh Bank to fulfil the demand of merchant banks, stockbrokers and stock dealers.

The BB, however,hasn't taken any step yet.

Merchant bankers and brokers have demanded a change to the definition of the capital market exposure so that they can keep their subsidiaries' investment in the stock market out of the purview when banks determine such exposure.

In case of exposure calculation, they also demanded exclusion of non-listed securities and non-listed strategic investment and consideration of the cost price rather than the market price of securities. If a financial institution gives a loan to its subsidiaries, all of the amount should not be considered as the capital market exposure of the institution, they said. Only the portion of the loan the subsidiary has used for share purchase should be included in the owning entity's exposure, they said.

“I don't believe that merchant bankers are influencing the market to fulfil their demand,” said Ahmad Rashid, a former senior vice president of the DSE Brokers Association.

Liquidity crisis in the banking sectoris the main problem for the bearish mood and it should be solved by reducing the interest rate on savings certificate, he said.

“A cut in the bank interest rate cannot solve the liquidity crisisalone.”

Rashid said the subsidiaries of different banks are in a tight corner as the existing definition of the capital market exposure is restricting them from making new investments. “The central bank has created the problem. Now it should bring changes to the definition fast for the sake of the capital market,” he said.

The Bangladesh Securities and Exchange Commission also extended the provisioning timeframe for merchant banks, stockbrokers and stock dealers up to December 2020 against their unrealised losses in their own portfolios. The timeframe was set to end in December this year, according to the BSEC instruction.

The move, however, did not leave any positive impact on the market. Turnover, another important indicator of the market, fell 20 percent to Tk 627.88 crore yesterday, with 12.84 crore shares and mutual fund units changing hands on the DSE.

Of the traded issues, 102 advanced, 195 declined and 43 securities closed unchanged on the premier bourse.

Bashundhara Paper Mills dominated the turnover chart with 34.39 lakh shares worth Tk 49.29 crore traded, followed by United Power Generation, Ratanpur Steel Re-Rolling Mills, Monno Ceramic Industries, and Legacy Footwear.

Chittagong stocks also experienced a fall yesterday with the bourse's benchmark index, CSCX, shedding 84.63 points, or 0.96 percent, to finish the day at 9,823.21.

Losers beat gainers as 77 securities advanced, 138 declined and 23 finished unchanged on the Chittagong Stock Exchange. The port city bourse traded 84.49 lakh shares and mutual fund units worth Tk 35.09 crore.