Growing economic tension batters stocks
Stocks in Bangladesh suffered a steep fall yesterday as worries about a slowdown in the economy deepened among investors amid continued stress in the forex market, the decline in export and remittance, higher inflation, and the escalating war in Ukraine.
The war, the jump in consumer prices to a multi-year high, and the recession fear in the advanced economies have already handed a severe blow to the economy.
The government's warning about rolling blackouts in the coming days and a threat of a global food crisis next year spooked the confidence of investors.
The World Bank has slashed its economic growth projection for Bangladesh for the current fiscal year to 6.1 per cent from its previous projection of 6.7 per cent made in June.
As a result, the DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), dropped 119 points, or 1.48 per cent, to 6,449 yesterday, the lowest since September 9.
Likewise, the Caspi, the all-share price index of the Chattogram Stock Exchange, was down 282 points, or 1.46 per cent, at 19,049.
The DS30, the index that consists of blue-chip companies, gave up 2 per cent, while the DSES, the Shariah-complaint index, dipped 1.9 per cent.
"The worries about the economy have deepened worldwide and Bangladesh is not a remote island. So, some big investors sold off shares of well-performing stocks, sending the index low," said Abu Ahmed, a stock market analyst and a former professor of economics at the University of Dhaka.
In the last few weeks, well-performing stocks suffered price fall except for some rumour-based companies, according to Prof Ahmed.
"People are shifting funds to the speculative stocks from the good ones. But the rise of the junk stocks does not reflect the real scenario."
European and US markets dropped last week as well.
At home, the stock market dropped after the fall in export receipts and remittances, two major foreign currency earners of Bangladesh, highlighting the crisis facing the economy, said Mir Ariful Islam, managing director of Sandhani Asset Management Ltd.
Exports slipped 6.25 per cent year-on-year to $3.9 billion in September, while remittances dropped 11 per cent to $1.54 billion.
To make the situation worse, Bangladesh witnessed a record 9.5 per cent inflation in August, the highest in 12 years, due to adverse effects of the fuel price hike recently, according to the State Minister for Planning Shamsul Alam. The Bangladesh Bureau of Statistics, however, has not published the data officially yet.
The latest blow to the market came yesterday owing to widespread Russian missile strikes on cities across Ukraine, including the capital, Kyiv. This was the first time Kyiv has been targeted in months, said BBC News.
The war has dealt a major shock to commodity markets and disrupted production and trade of several commodities, particularly those where Russia and Ukraine are key exporters, including energy, fertilizers, and grains, said the World Bank earlier.
In another blow for the oil importing nations like Bangladesh, oil prices rose for five straight days before falling yesterday. Brent crude oil stood at $97 yesterday, up 10 per cent from $88 on October 3, according to oilprice.com.
Referring to her interactions with world leaders and the United Nations Secretary-General, Prime Minister Sheikh Hasina said last week that all were very much anxious and apprehended that there might be a grave famine in 2023.
She suggested not to let not any land uncultivated, according to the news agency BSS.
Earlier, the Bangladesh Bank raised its benchmark interest rate by 25 basis points to 5.75 per cent in order to contain higher consumer prices, a move that would make funds costlier.
As a result, money circulation is going to shrink and this has had an impact on the market, Prof Ahmed said.
Sandhani Asset Management's Islam went on to say that a rumour was spread in the market that the floor price might be withdrawn, accelerating selling pressure.
In July, the Bangladesh Securities and Exchange Commission (BSEC) reintroduced the floor price to halt the free fall of the market amidst global economic uncertainties.
The stocks nosedived due to the heavy sell pressures by the anxious investors as the rumour spread in the market over the floor price withdrawal, said International Leasing Securities Ltd in its daily market review.
The BSEC, however, said no discussion regarding revoking the floor price had taken place.
A top official of a merchant bank says some companies are going to raise funds in the coming months so some investors have sold shares to subscribe to the securities of the new companies.
Among them, Asiatic Laboratories and Global Islami Bank are set to raise Tk 520 crore, DSE data showed.
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