Stocks bounce back on buying spree

Stocks bounced back yesterday as investors went on a buying spree to take advantage of the low prices of many securities and higher loan margin for share purchases.

DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), rose 88 points, or 1.78 per cent, to 5,177.

Some investors bought shares that experienced huge price cuts in recent times and this had a positive impact on the index, said Mostaque Ahmed Sadeque, former president of the DSE Brokers' Association.

Yesterday was the first day of a week-long nationwide lockdown, during which trading hours are limited in a bid to curb the spread of Covid-19.

The novel coronavirus has resurfaced all over the world amid a massive second wave but foreign stock markets did not feel that much of a pinch.

"So there is nothing to be panicked about here in Bangladesh either," he added.

However, the profits of listed companies will surely be affected to some extent, according to Sadeque, also managing director of Investment Promotion Services.

"So the companies that are giving 20 per cent dividends this year may give 18 per cent dividends next year," he said.

Besides, these companies do not deserve to see a 15 to 20 per cent decline in prices due to the lockdown.

"But the market fell drastically because of our investors, who are sensitive to rumours and panic," Sadeque added.

Turnover, an important indicator of the market, dropped 54 per cent to Tk 236 crore.

The rise in the loan margin for share purchases has boosted the market, said Mir Ariful Islam, head of research at Prime Finance Asset Management Company.

At present, brokers and merchant bankers are allowed to lend Tk 80 against an investment of Tk 100. Earlier, the limit was Tk 50.

Investor confidence will be restored if the index remains in positive territory for the next few days, Islam said.

"Actually, many people sold their shares out of panic but they should wait for better times to come," he added.

When the market starts rising after falling for a long time, low-performing companies make it to the top gainers' list, which signals that gamblers are active again, said Rubel Hosen, a stock investor.

Yesterday, Bangladesh National Insurance Company topped the gainers' list, rising 9.96 per cent, followed by Emerald Oil, Appollo Ispat, Jute Spinners, and Keya Cosmetics, DSE data shows.

Among them, Emerald Oil and Appollo Ispat have been in the low-performing Z category for many years. Keya Cosmetics was also in the same category just a few months back.

Rumour-based investments are yielding higher profits, which is attracting more buyers, Hosen said.

"But they have been the cause for huge losses as well. So, the regulator should see who is playing with such stocks," he added.

Beximco Limited topped the turnover list with shares worth Tk 32 crore changing hands followed by Robi Axiata, Beximco Pharmaceuticals, LafargeHolcim Bangladesh and Asia Pacific Insurance.

Shahjalal Islami Bank shed the most, dropping 10 per cent, followed by Reliance Insurance, Envoy Textile, United Insurance and ICB Third NRB Mutual Fund.

At the country's premier bourse, 231 stocks advanced, 14 declined and 76 remained unchanged.

Similarly, the port city bourse also bounced back yesterday.

CASPI, the general index of the Chittagong Stock Exchange, rose 250 points or 1.7 per cent to close at 14,964.

Among 185 traded stocks, 122 rose, 27 fell and 36 remained unchanged, CSE data shows.