Stocks bleed for worries over economy

The stock market index slid down 134 points yesterday, the steepest in a span of over two months to reach less than 6,500.

At the end of the day, the DSEX, the benchmark index of the DSE, plummeted 2.04 per cent to 6,430.

The main reason for the fall is apprehension stemming from news over the economic condition of the country and global economy, said Richard D Rozario, president of the DSE Brokers Association of Bangladesh.

The trade deficit of Bangladesh rocketed to an all-time high of $24.90 billion between July and March.

Import payments increased 44 per cent year-on-year to $61.5 billion in the first nine months of the current fiscal year, according to Bangladesh Bank data.

Between July and April, migrant workers sent home $17.30 billion, down 16.2 per cent year-on-year, the data showed.

In a major blow to the households, inflation rose to 6.22 per cent in March, a 17-month high, shows data of the Bangladesh Bureau of Statistics.

The only encouraging macroeconomic indicator is export earnings and it has been stellar.

Between July and April, shipments rose 35.14 per cent.

As the US dollar was depreciated several times in the current year, foreign investors were in a mood to make sales, said Rozario.

It is a normal process because the dollar became costly with the depreciation and this hurts foreign investors, he said.

They need to make more profits to keep their real investment safe, he said, adding that the interest rate in the US market rose twice and that was also one reason behind them going for making sales.

On the other hand, the market reacts aggressively in Bangladesh as it is a retail investor-based market, he added.

The discomfort of economic instability, and uncertainties of the coming days due to the Russia-Ukraine war generated apprehensions among stock investors, said Mohammad Emran Hasan, CEO of Shanta Asset Management Company.

Already the inflation rate is rising quickly. Food price and oil prices have been impacted for the Ukraine-Russia war and there is no certainty on when the war will end, he said.

Sri Lanka's economic condition also made them alert and besides, they prefer retaining cash by selling shares, he said, adding, "I think our investors overreact."

Yesterday's drop of the DSEX was a single day's highest fall since March 7 this year, when it had dropped 182 points, or 2.75 per cent.

With the four consecutive days' fall, the index reached its lowest point in nine-and-a-half months. In July 29 last year, the index had stood at 6,425.

There was nothing big to lead to such a steep drop of the index in a single day, Hasan said, adding that the market was already down by around 1,000 points since last October.

The DSEX fell 12.5 per cent or 921 points since October 6, when it was at 7,351, the DSE data shows.

This means the impact of the negative factors of the economy has already befallen the index, he said.

The Indian market also saw corrections but their index was already overvalued whereas overall price earnings ratio of the DSE is still very low, said Hasan.

The DSE's overall market price-earnings ratio was 14.3, according to UCB Stock Brokerage.

Bombay Stock Exchange's Sensex dropped 2.69 per cent, or 1,466 points, in the last five days.

The stocks nosedived due to heavy pressure of investors who are making sales in a panic, said International Leasing Securities in its daily market review.

Hence, the selling spree of the jittery investors sharply pushed down the stock market index. The downturn was also fuelled by fears that the interest rate would be raised in an attempt to tackle the inflation, it said.

Mohammad Rezaul Karim, spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), said the stock index dropped mainly due to panic and a lack of confidence, although participation of institutional investors had risen in the past one month.

The stock market regulator is taking steps to raise their participation and it took initiatives to increase the investment capacity of the Investment Corporation of Bangladesh (ICB) too, he said.

Some of the schemes of state-run banks and companies at the ICB had matured and the investment bank was selling shares to return their funds, he said, adding that this was one of the reasons behind the market's fall.

Meanwhile, the BSEC consulted with the banks and companies to renew the schemes. "They agreed," he said.

So, the ICB will start to buy shares again. Moreover, more funds will be invested from the stock market stabilisation fund, which will have a positive impact on the index, he added.

The sellers maintained a strong presence yesterday. Of the 381 issues to undergo trade, 348 declined, only 26 advanced and 7 issues remained unchanged.

All the sectors ended the session in the red zone with the top declines stemming from paper and printing, which plunged 4.9 per cent, services and real estate 4.7 per cent and travel and leisure 4.4 per cent.

Based on the turnover, investors' activities were mostly concentrated on pharmaceuticals (11.6 per cent), banks (11.3 per cent) and food and allied (10.7 per cent).

Meanwhile, both the DS30, the blue-chip index, and DSES, the shariah-based index, lost 40 points and 21 points respectively, shows DSE data.

The DSE's turnover rose by more than 24 per cent to Tk 1,024 crore. It was Tk 823 crore on the previous day.

Investors became frightened to see the fall of the index as news was coming in through all the media that economic indicators of the country may come to showcase deteriorations, said a merchant banker.

So, they preferred to keep cash instead of stocks in spite of the fact that keeping cash is not a wise choice as inflation was going up, which would reduce the value of cash.

Due to apprehensions over further falls of the index, most stocks underwent a pressure of sales, he added.

FAS Finance and Investment topped the gainers' list with a rise of about 9.8 per cent. S Alam Cold Rolled Steels, NRB Commercial Bank, Fu-Wang Ceramic Industries and International Leasing Financial Services also saw major gains.

Phoenix Insurance Company shed the most with a 5 per cent drop. The National Housing Finance and Investments, Tamijuddin Textile Mills, ACI Formulations and Alhaj Textile Mills were among those suffering heavy losses.

Shinepukur Ceramics became the most traded stock with shares worth Tk 60 crore changing hands, followed by Beximco, JMI Hospital Requisite Manufacturing, Rangpur Dairy & Food Products (RD Food) and Fu-Wang Ceramic Industry.

The Chittagong Stock Exchange (CSE) also fell yesterday. The CASPI, the main index of the CSE, went down 382 points, or 1.98 per cent, to close the day at 18,866.

Of the 306 stocks to undergo trade, 33 rose, 266 fell, and seven did not see any price movement.