Stocks soar on hopes for rate cuts for savings instruments
Stocks rose 3.75 percent yesterday, the biggest single-day gain in two and a half years, as hopes for cuts in interest rates on savings instruments infused positive sentiments into the market.
DSEX, the benchmark index of the Dhaka Stock Exchange, finished the day at 4,277.05 points, after posting a rise of 154.72 points, the steepest since November 29, 2012, when the index jumped 219 points.
The index that tracks bellwether stocks lost 13.44 percent since January 1, largely due to the political turmoil that sapped investor confidence.
The central bank is expected to reduce the interest rate on savings instruments. If that happens, it will divert liquidity from the money market into the stockmarket.
The rate of interest on savings instruments is between 12 percent and 14 percent, compared to the banks' weighted average deposit rate -- 7.26 percent.
After the market closed for the day, Finance Minister AMA Muhith said the government would cut the interest rates on savings instruments by about 2 percentage points.
The interest rates on five-year tenure savings instruments will go down to 11.16 percent from 13.19 percent now, Muhith said during a pre-budget meeting with the chairmen of parliamentary standing committees at the National Economic Council in Dhaka.
A finance ministry official told The Daily Star said the government would issue a notice on the issue soon, ordering cuts on interest rates on some other savings instruments.
Between July and February, the sales of savings instruments soared 77.41 percent year-on-year to Tk 26,533 crore, according to statistics from the National Savings Directorate.
“An indication of a lower interest rate on savings certificates, coupled with natural budgetary expectations, created scope for the market to rebound,” IDLC Investments said.
Investors jumped in vigorously to take advantage of the scope, putting an immense buying pressure on almost all scrips, according to the merchant bank.
“Apart from the savings certificate issue, the commerce minister's comments on the central bank's role in the capital market boosted investor confidence,” said Shakil Rizvi, managing director of Shakil Rizvi Stock.
Commerce Minister Tofail Ahmed, at a meeting last week, told Bangladesh Bank that it should look into the share market issues and take steps to revive the ailing market.
The day's turnover, another important indicator of the market, jumped 24.2 percent to Tk 520.81 crore with 13.25 crore shares and mutual fund units changing hands.
United Power Generation and Distribution Company topped the turnover leaders' chart with a transaction of 24.36 lakh shares worth Tk 50.96 crore, followed by ACI Formulations, MJL Bangladesh, Saif Powertec and Ifad Autos.
Gainers outnumbered losers 289 to 17, with three securities unchanged on the DSE.
Among the major sectors, IT gained 9.8 percent in market capitalisation, followed by general insurance with 9 percent, non-banking financial institutions 6.5 percent, mutual fund 5.8 percent and fuel and power 4.86 percent. No sector declined in market capitalisation.
Islami Insurance was the day's best performer, advancing 18.98 percent, while 3rd ICB Mutual Fund was the worst loser, slumping 5.7 percent.
Chittagong stocks also soared yesterday with the bourse's benchmark index, CSCX, increasing 293.54 points to stand at 8,010.88.
Gainers outperformed losers as 236 scrips advanced and seven declined while three closed unchanged on the Chittagong Stock Exchange.
The port city bourse traded 1.29 crore shares and mutual fund units, generating a turnover of Tk 43.18 crore.
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