Stocks plunge on BB move, political jitters

The lowering of ceiling for banks' loans-deposit ratio and the rising political tension led to panic sale yesterday, causing the Dhaka Stock Exchange indices to come crashing down.

DSEX, the benchmark general index of the DSE, closed at 6,039 points after shedding 88 points -- the highest in one year.

“Investors overreacted,” said Khairul Bashar Abu Taher Mohammed, secretary general of Bangladesh Merchant Bank Association (BMBA), in an emergency press conference called yesterday to assuage investors.

On Tuesday, the central bank instructed conventional banks to lower their loan-deposit ratio to within 83.5 percent and Shariah-compliant banks to within 89 percent by June 30 with a view to reining in aggressive lending.

There is no direct implication of the lower ceiling of banks' loans-deposit ratio on the stockmarket, he added. “The sale pressure was created by a particular section of investors to create panic,” said Mostaque Ahmed Sadeque, president of DSE Brokers Association of Bangladesh.

The press conference was organised by the BMBA and the DSE Brokers Association.

Sadeque, who is also a member of DSE, said the new monetary policy is stockmarket-friendly and there is no crisis in the market.

“A section of investors spread out a rumour among the investors that market will fall further. As a result market saw a big blow,” he added.

The market will see volatility until February 8 over political tension, said Mohammed, also the chief executive officer of MTB Capital.

“A bunch of opportunists are spreading panic over political issues to buy shares at low price.”

He called upon investors not to give in to the sell pressure because the market will bounce back soon.

“Those who are selling shares now will feel irate later for losing profits,” he added.

In a parallel development, DSE in a statement appreciated the BB for announcing the stockmarket-oriented monetary policy on January 29 for the second half of fiscal 2017-18.

“The new monetary policy will bring in more investment to the stockmarket,” it said.

The central bank discouraged the corporate sector from depending on banks for their long-term financing needs. It instead advised them to raise funds by issuing bonds in the capital market.

“The initiative will increase the depth of the stockmarket,” the DSE said in the statement.

The central bank also put in more effort in the new monetary policy on increasing portfolio investment by non-residents, which will increase the inflow of foreign investment, according to the statement.

Turnover, which indicates how often shares change hands, stood at Tk 472 crore, up 18.3 percent from the previous day.

DSEX lost 112 points in the first half but recovered slightly in the last hour on the back of institutional investors' buying spree, according to Sadeque.

At the DSE, all the major large cap sectors declined, with non-bank financial institutions losing the most, at 2.33 percent.

Of the total traded securities, 31 gained price, 278 declined and 26 remained unchanged. DS30 and DSES were 28.05 points and 16.00 points in the red respectively.

The port city bourse, CSE, also closed in the red, while CSCX and CASPI shed 157.4 and 263.9 points respectively.