Lockdown tip: Hold on to good stocks

With a new lockdown coming up to curb the fast spread of the coronavirus, stock market analysts have recommended not to panic and holding on to shares of companies with good performance records.

Road Transport and Bridges Minister Obaidul Quader yesterday made public the government decision to impose a seven-day countrywide lockdown from Monday.

Investors need to have patience during the crisis period and they should not sell shares of companies showcasing good performances, said Sharif Anwar Hossain, president of the DSE Brokers Association (DBA).

Many investors gained profits by purchasing shares at a lower price during last year's lockdown, he said.

This year the panic level is different too because investors have come to realise the impact of the pathogen in the past one year, he said.

On the other hand, many investors have already retired to the sidelines in the last couple of weeks witnessing the higher rate of infections, so turnover of the market dropped.

Turnover, an important indicator of the stock market, dropped to the Tk 400 crore level last week whereas it was above the Tk 900 crore level one month earlier, shows the Dhaka Stock Exchange data.

Investors are in panic now, a situation which has been prevailing for the past couple of weeks as the number of infections and deaths have been soaring, said stock investor Mahmudul Hasan.

Investors apprehend that the country's economy could be much worse impacted compared to that resulting from the previous lockdown, he said.

In an analysis, The Daily Star found that the average profit of listed companies dropped 34 per cent year-on-year to Tk 1,655 crore in the April to June period.

In other words, demand hit rock bottom after the health crisis wiped out millions of jobs and created an additional 20 per cent new poor in Bangladesh.

The country was under lockdown during the two months of April and May.

Many companies ran their operations by using their savings but this year they will be worse off if the lockdown remains for a long time, said Hasan.

"So, they are in panic and concerned after the announcement of the lockdown. A rumour of trade closure is also fuelling the panic," he said.

However, spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), Mohammad Rezaul Karim, said the stock market would remain open if banks remained open.

As the stock market can run online, it will remain open, he said.

Karim, also an executive director of the regulatory body, said investors can conduct trade online by even using mobile phones.

"If necessary they can trade by calling operators so we will not face any problem to run the market," he added.

Brokers and Central Depository Bangladesh officials can run their office maintaining social distancing protocols so there is no problem to run the market, he added.

There will be some impact on the performance of the listed companies due to the lockdown, so it will have a cost on share prices too, said Mohammad Rahmat Pasha, CEO of UCB Capital Management.

But on the positive side, a free fall is not possible in the market as the floor price is active, he said.

The BSEC set the floor price on March 19 last year for all stocks on the basis of average prices of the previous five days to stop a market fall amidst the coronavirus pandemic.

On the other hand, factories will remain open during the lockdown so the impact might not be that big as witnessed last year, said Pasha.

All will depend on how things play out during the lockdown period and how the companies cope with the new restriction, he added.