The Dhaka Stock Exchange saw Tk 8,856 crore -- or 2.10 percent -- wiped off its market capitalisation in the last two months as institutional investors bided their time on the sidelines while general investors went for panic sell-off.
“This is what happens when the market is mostly composed of retail investors,” said Mohammad Ali, chief executive officer of Dhaka Bank Securities.
When the market goes down, general investors have a knee-jerk reaction, dragging the market further downwards.
The DSEX, the benchmark index of the premier bourse, declined 58.07 points, or 1.04 percent, yesterday to finish the day at 5,512 -- the lowest since January 2. In the last three trading sessions, it lost 119.22 points.
Turnover, another important indicator of the market, also dropped 9.37 percent to Tk 354.35 crore, a three-month low.
Market insiders say the liquidity pressure in banks compelled institutional investors to take a wait-and-see approach despite the central bank's extension of deadline to bring down the loan-deposit ratio to 83.5 percent by six months.
“Banks and institutional investors are in a tight position now,” Ali said, adding that if the interest rate rises the stockmarket is negatively affected.
The weighted average interest rate on deposits crept up from 5.26 percent in December last year to 5.34 percent in January, according to data from the Bangladesh Bank.
Data for the last two months are not available yet but bankers of some private banks say the interest rate is on the rise.
Some banks have announced lower dividends despite higher earnings per shares (EPS), a development that has affected investor confidence, said the head of portfolio of an asset management company.
Brac Bank, one of the blue-chip stocks, declared 15 percent stock dividend for 2018 when its EPS was Tk 5.17. Its stocks fell 7.34 percent to Tk 75.7 yesterday.
The banking sector and the insurance sector declined 2.4 percent and 2.1 percent respectively yesterday. Of the traded issues, 94 advanced and 206 declined, while 43 securities closed unchanged on the premier bourse.
Brac Bank dominated the turnover chart with its transactions of 28.70 lakh shares worth Tk 21.85 crore, followed by United Power Generation, Dutch-Bangla Bank, Grameenphone and British American Tobacco Bangladesh. Alltex Industries was the day's best performer posting 9.82 percent gain, while Bank Asia was the worst loser, shedding 10.52 percent.
Chittagong stocks also fell, with the bourse's benchmark index, CSCX, declining 134.56 points, or 1.29 percent, to close at 10,235.88.
Losers beat gainers as 150 declined and 61 advanced, while 35 finished unchanged on the Chittagong Stock Exchange. The port city bourse traded 35.08 lakh shares and mutual fund units worth Tk 10.49 crore.