Stocks take a dive over interest rate concerns

Dhaka stocks shed 73 points yesterday as investors are plagued by fears of a regulatory intervention in the interest rate ceiling coupled with chances of Russia's war on Ukraine placing the global economy in a tight position amid surging oil prices.

The DSEX plunged 73 points, or 1.10 per cent, to hit 6,591 by the end of the trading session, marking the second consecutive day of decline for the benchmark index of the Dhaka Stock Exchange (DSE).

Besides, the US and UK have warned that their economies may fall into recession, which is cause for concern among local investors as both countries are major export destinations for Bangladesh, according to a top official of a merchant bank preferring anonymity.

CNN ran a report on April 26 saying Deutsche Bank raised eyebrows earlier this month by becoming the first major bank to forecast a US recession, albeit a "mild" one.

On May 5, Financial Times ran another report saying the Bank of England has warned the UK economy will slide into recession this year as higher energy prices have pushed inflation above 10 per cent.

In answer to a query, the merchant banker said the news had a late impact on the domestic stock market as the fear spread slowly.

He went on to say that the recent hike in edible oil prices and Sri Lanka's economic and political turmoil are also among the concerns investors currently face.

"Although the economic situation is not much of a worry, the peoples' concern is much higher. Bangladesh's export earnings are still very impressive though," he said.

Bangladesh's export earnings soared 51.18 per cent year-on-year to $4.73 billion in April, as per data from the Export Promotion Bureau.

"The stocks nosedived as risk-averse investors opted out due to fears of regulatory intervention in the interest rate ceiling to fight inflation," said International Leasing Securities in its daily market review.

Bangladesh Bank had previously ordered all banks to provide a maximum 6 per cent interest on deposits and 9 per cent interest on lending. Banks in the country have maintained the ceiling since April 1, 2020.

The selling spree of jittery investors sharply pushed down the stock prices while risk-averse investors preferred to stay away from the market considering the volatility that prevailed over the trading session.

Meanwhile, both the DS30, the blue-chip index, and DSES, the shariah-based index, lost 15.13 points and 15.48 points respectively, DSE data shows.

All sectors witnessed price corrections except miscellaneous, which rose 0.1 per cent while travel and leisure dropped 3.8 per cent, services and real estate fell 3.2 per cent and textiles plunged 2.8 per cent.

The investors' attention was mainly concentrated on pharmaceuticals and chemicals (13.9 per cent), food and allied (13.1 per cent), and financial institution (12.4 per cent).

The DSE's turnover dropped around 10 per cent to Tk 1,135 crore yesterday while it was Tk 1,258 crore the day before.

At the DSE, 35 stocks advanced, 323 declined and 21 remained unchanged.

BD Finance topped the gainers list with a roughly 6.9 per cent rise while Imam Button, ACI Formulations, RD Food, and Bangas Ltd also saw major gains.

Asia Insurance shed the most with a 6.37 per cent drop while JMI Hospital, Gemini Sea Foods, Paper Processing and Packaging, and Bangladesh Monospool Paper were among the heavy losers.