Investors cautious as market index teeters on top

Stock investors in Bangladesh are being cautious about pouring their money into the market as its prime index is hovering at a record high.

As a result, index movement was slow and market turnover took a dive.

The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), closed at 7,228 points by the end of last week while it was 7,258 points at the start.

Similarly, the market's daily average turnover slipped 13 per cent to Tk 1,941 crore in the same period.

"Investors are in a 'wait and see' position as they fear a correction could start at any time since the market index skyrocketed in the last one year," a top merchant banker said.

The market index rose by more than 45 per cent, or 2,257 points, in the last one year, DSE data shows.

And although sector-wise corrections did occur during this period, it could happen again.

"So, investors have set aside some funds and are prepared to buy if the market falls," he said, adding that many of them have already sold off a big chunk of their shares in fear of a market correction.

Last week, 162 companies advanced, 198 declined and 18 held steady at the DSE.

A senior official of an asset management company said firms like his do not trade on a regular basis and instead go for long-term investments.

Considering the situation though, he sold off some stocks to secure enough funds to buy others should the market fall.

However, many well-performing stocks did not appreciate in value alongside the soaring market index. Instead, companies with low paid-up capital and junk stocks enjoyed a steep rise.

"So, well performing stocks are not sellable yet but these are still lucrative," he added.

In answer to a query, the asset manager said the overall market is not overvalued but many stocks are.

"That's why people should choose stocks very cautiously," he added.

Pacific Denims topped the gainers list last week, soaring by 25 per cent, followed by Eastern Insurance 21 per cent, Alif Manufacturing 19 per cent, Bangladesh National Insurance 17 per cent and KDS Accessories 17 per cent.