Dearth of buyers shoots down stock market turnover
Trade in the stock market of Bangladesh has dried up once again as buyers are uninterested in making fresh bets considering the unsatisfactory declarations posted by listed companies for the July-December period of fiscal 2022-23.
The DSEX, the benchmark index of the Dhaka Stock (DSE), dropped 37 points, or 0.6 per cent, to hit 6,246 points over the past week.
Average turnover of the Dhaka bourse, which indicates how much trading activity took place, declined by 34.9 per cent to reach Tk 422 crore at the same time despite repeated endeavours by the Bangladesh Securities and Exchange Commission (BSEC) to raise it.
Most institutional investors are inactive in the market, leading to lower turnover as individual investors are reluctant to invest in a dry market, said a top official of a merchant bank, preferring anonymity.
Asked about their stance in this regard, he said the bank is not making any investments at present as they fear the funds could become stuck.
"Due to the floor price mechanism, the board directed us not to invest any fund. We will only be allowed to invest again if the market starts to rise strongly," he added.
At the end July 2022, the BSEC set the floor price of every stock to halt the freefall of market indices amid global economic uncertainties.
The floor price of each stock was calculated based on its average closing price on July 28 last year and the preceding four days.
But in December, the market regulator lifted the floor price for 169 companies and set the circuit breaker in a way such that their stock prices would not be allowed to drop more than 1 per cent based on the previous day's closing price.
"As the stocks are not allowed to drop abiding by the companies' performances, we cannot buy shares now. Moreover, we are waiting for the stocks to drop to their real lowest level," the merchant banker said.
Around 70 per cent of the listed companies' performance dropped during the July-December period of fiscal 2022-23, as per their financial reports posted with the DSE.
The BSEC needs to boost market confidence, lift the price mechanism and let share values be based on demand and supply to make the market sustainable, he added.
The stock market passed a gloomy week as investors mostly followed a cautious stance amid a liquidity crisis in the market, International Leasing Securities said in its weekly market review.
The market opened with a downward trend that sustained throughout the week, sans a moderate one-day rise.
"Panic-driven investors dumped their holdings and preferred to hold cash on hand because of the rumours of lifting the floor prices," it said.
However, the regulator has not declared anything in this regard. The investors' participation remained thin on the trading floor, which caused the average turnover to decrease, it added.
All sectors witnessed price correction except tannery, which rose 1.1 per cent, while the services and real estate sector dropped 3.9 per cent, general insurance fell 3.7 per cent and IT slid down 2.6 per cent.
Investor activity was mostly focused on the IT (13.8 per cent), food and allied (12.2 per cent), pharmaceuticals and chemicals (12 per cent), and miscellaneous (8.1 per cent) sectors.