Pharma gives stocks a shot in the arm
The stock market index had been on an upward curve last week with pharmaceuticals in the lead as investors bought the sector's stocks in hopes of higher future returns amid the threat of a second wave of the pandemic.
DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), rose 119 points, or 2.41 per cent, to 5,094.
Although the pharmaceutical sector's market capitalisation increased by 2.42 per cent, it was beaten by the engineering sector which topped the list with a rise of over 7 per cent, propelled by the inclusion of Dominage Steel in the stock market.
Listed drug makers have performed better than other sectors amid the pandemic and have the potential to grow in the future, said Mir Ariful Islam, head of research at the Prime Finance Asset Management Company.
So pharmaceutical companies' stocks underwent an upward trend along with those of banks and the financial sector, he added.
Echoing the same, a merchant banker preferring anonymity said the pandemic's second wave would increase people's demand for pharmaceutical products, creating more opportunities for the drug makers.
As people started seeing doctors in their chambers again, prescription medicine sales will not be as affected as it was during the April-June period, when most people remained at home to avoid infection, he said.
The limitations on public movement are presumed to have led to the 30 per cent drop in sales year-on-year during that quarter, the merchant banker added.
With December ushering in the year's end, banks and financial institutions are due to announce dividends for the future so people were taking up their stocks, said a stock broker.
Market capitalisation of the banking sector rose 1.76 per cent while that of non-bank financial institutions increased 1.09 per cent.
Most listed banks booked higher profits in the January-September period despite having a lower interest income mainly due to lower provisioning requirements, shows the banks' quarterly data analysis.
The provisioning requirements reduced for the central bank allowing banks to withhold classification of loans in the current year considering the impacts of the pandemic.
"But its recent decision will have an impact on banks' profitability," said the stock broker.
Last week a central bank notice stated that the lenders must keep an extra 1 per cent provision than what they now maintain for unclassified loans.
Despite this, the broker backed the decision, considering the future benefits the provisioning would bring about.
If the banks declare higher profits and dividends on an "artificial" profit, it will turn out to be more costly for them, he added.
Meanwhile, the insurance sector witnessed a fall.
As most insurance stocks already doubled or rose over 50 per cent during the last few months, the last two weeks had been a period of corrections.
Market capitalisation of the general insurance sector dropped around 1 per cent followed by the mutual fund sector's 1.97 per cent.