Coronavirus fears grip Dhaka bourse too | The Daily Star
12:00 AM, February 27, 2020 / LAST MODIFIED: 12:48 AM, February 27, 2020

Coronavirus fears grip Dhaka bourse too

All over the globe stocks have been on slide in recent days as economic costs of the coronavirus pandemic have started to spook investors. The situation is no different in Bangladesh.

Most of the companies in Bangladesh bring in their raw materials from China, which has been on lockdown for a month now for the outbreak of the lethal pneumonia-like virus that has already 3,000 lives.

This has halted production, which in turn will affect their earnings in the upcoming quarters, said market analysts.

Yesterday, DSEX, the benchmark index of the Dhaka Stock Exchange, dropped 72.1 points, or 1.6 per cent, to 4,549.11. In the past five days, the index plunged 208.89 points, or 4.4 per cent.

On Tuesday, the Dow shed almost 900 points, falling more than 3 per cent to close at 27,081. The S&P 500 also closed more than 3 per cent lower, while the Nasdaq sank 2.8 per cent.

In the UK, the FTSE 100 fell almost 2 per cent to a 12-month low of 7,018, while Japan's Nikkei 225 index fell 3.3 per cent.

Sponsors of a number of listed companies said their production is hampered due to the lack of raw materials. So, they are on the hunt for new sources.

The impact of coronavirus will be felt deeply in the days ahead as all rod makers' raw materials come from China, said RSRM Director Marzanur Rahman.

A sponsor director of a listed textile company echoed the same, saying the textile and garment sector would be impacted mostly due to coronavirus.

"And our productions have already been affected," he said preferring anonymity.

However, a merchant banker said not all listed companies import raw materials from China, so they should not be affected too much by the coronavirus pandemic.

Apart from the coronavirus issue, the Dhaka bourse is preoccupied with the forthcoming reporting season of banks, he said. "They fear banks' earnings will fall."

When the single-digit interest rates are implemented most of the listed banks' earnings are likely to contract as their lending and spread may be squeezed.

Spread is the difference of in the interest rates for lending and deposits.

The Bangladesh Bank has instructed all banks to charge 9 per cent interest rate on all loans except credit cards from April 1.

As the banking sector is the still the top sector in the stock market in terms of market capitalisation its impact would be expansive, he added.

Among the 30 listed banks, the stock prices of 22 fell yesterday and five stayed unchanged.

Besides, the order from the court that Grameenphone, the largest listed company on the bourse, will have to pay another Tk 1,000 crore within the next three months also dampened the mood of the stock market, said another leading merchant banker.

Grameenphone had deposited Tk 1,000 crore to the state coffer just the previous day.

The payments will eat into the operator's reserves, meaning the Grameenphone board might decide to announce lower cash dividend come next year. 

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