Banks’ performance lacklustre despite earnings disclosure

Major indices of the Dhaka Stock Exchange (DSE) witnessed a rising trend over the past week with its daily average turnover also gaining despite the lacklustre performance of bank stocks.

Bank stocks usually make bigger contributions to the turnover when their dividends are announced. However, the sector failed to attract investors even though several banks declared higher profits.

All four banks that announced their yearly financial performance this week saw higher profits, according to DSE data.

The DSEX, the benchmark index of the DSE, advanced by 13.5 points, 0.22 per cent, throughout the week to close at 6,228 points.

The DSES, which represents shariah-compliant companies, added two points to reach 1,349 points while the DS30, an index comprised of blue-chip stocks, edged up by one point to 2,202 points at the same time.

Meanwhile, daily average turnover of the DSE, which indicates how much trading activity took place in the market, increased by 9.9 per cent to stand at Tk 491.7 crore.

Bank stocks accounted for just 2.6 per cent of the total turnover while the highest contribution came from the food and allied, and IT sectors, which contributed 18.6 per cent and 16.7 per cent respectively.

As such, prices of bank stocks remained almost unchanged over the past three trading sessions ahead of the Eid holiday, which began yesterday.

Top officials of the Bangladesh Securities and Exchange Commission (BSEC) had previously expressed hopes that the market would bounce back from a string of poor performances thanks to the year-end declarations by banks.

"But it did not turn out this way in reality," said a senior official of a stock brokerage on condition of anonymity.

This is mainly because investor confidence is still shaky as the floor price mechanism is in place.

"So, they are not buying stocks," he added.

At the end of July last year, the BSEC had set floor prices for each stock to halt the freefall of market indices amid global economic uncertainties.

But later in December, the floor prices of 169 companies were lifted in order to bring vibrancy back to the market.

And then in March this year, the market regulator reintroduced the floor prices, meaning that all stocks are currently barred from dropping below certain levels.

The benchmark index of the country's premier bourse witnessed a bullish trend this week as optimistic investors showed their buying appetite in sector-specific stocks ahead of the Eid-Ul-Fitr vacation, International Leasing Securities said in its weekly market review.

Investors kept taking position in the travel, paper, life insurance and IT sectors throughout the week, it added.

Among the sectors, travel and leisure advanced 2.2 per cent, paper and printing gained 1.7 per cent and life insurance rose 1.5 per cent while services dropped 2.2 per cent and jute fell 0.7 per cent.

Investor participation was mostly centred on the food and allied (18.6 per cent), IT (16.7 per cent), travel and leisure (10.4 per cent), and pharmaceuticals and chemical (9.2 per cent) sectors.

In its weekly analysis, Shanta Securities said market movement was driven by positive changes in the market cap of travel and leisure, pharmaceuticals and chemical, and life insurance scrips amid negative changes in that of services and real estate, jute, and financial institution scrips.