Stocks continued to suffer massively for the fourth consecutive day yesterday as some brokers went for forced sales amidst a lower participation from institutional investors.
Forced sales come when the equity-debt ratio of an investor, who invests by taking margin loans from brokers or merchant banks, comes down to 30.
The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), declined 57.14 points, or 1.07 percent, finishing the day at 5,261.60. The index lost 198.31 points in the last four trading days.
Turnover, another important indicator of the market, also dropped 24.89 percent to Tk 274.83 crore, which is a one year low, with 6.40 crore shares and mutual fund units changing hands on the DSE.
“This is normal for forced sales to arise now as the top category stocks fell by a huge extent in the last few days and margin loans were given to the stocks,” said Mohammed Rahmat Pasha, managing director of UCB Capital.
He said this sales pressure also pushed the index down but the brokers and merchant bankers had no option but to go for the sales as they have been facing serious problems since 2010 for barring the execution of forced sales.
Market insiders said a liquidity crunch among institutional investors caused the index to fall. On the other hand, decreased performance by some big companies alongside price reductions had a massive impact on the index.
According to IDLC Securities data, the top three negative index contributors yesterday were British American Tobacco Bangladesh, United Power Generation and Grameenphone.
The telecom regulator's tough stance against Grameenphone caused its share price to slide in the last few days. The operator's stocks were down around 17 percent in the last seven working days.
United Power Generation gave up 24 percent. A huge amount of shares of British American Tobacco Bangladesh has been sold by the foreign portfolio investors and the stock dropped 202 percent due to bonus share dividend and foreign sales adjustments.
Brac Bank and Heidelberg Cement declared a lower dividend on their performance compared to that last year. Brac Bank dropped 17 percent and Heidelberg Cement 21 percent in the last 10 days.
Rahmat Pasha said all of the stocks have huge market capitalisation and they fell massively, so the index was down with the decline.
Apart from these companies, almost all the banks declared lower dividend compared to that in 2018, which impacted investors' confidence, he added.
“When the big companies fall and the index is impacted, all investors become frightened and it then impacts them,” he said.
A top official of another leading stock broker, requesting anonymity, said forced sales pressure was a reality of the market now. But the stockmarket regulator should be more active in its monitoring to bring back investors' confidence, he said. Mostaque Ahmed Sadeque, former president of the DSE Brokers' Association, said the market was observing a free fall but none was taking any step.
“Some sponsors and institutional investors are selling shares instead of buying,” he said. General investors have lost confidence so the stockmarket regulator should take up initiatives for investors' confidence to bounce back, he added.
Saifur Rahman, spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), is abroad and the regulator is yet to convey the name of the acting spokesperson.
The Daily Star tried to talk to two other BSEC officials but they declined to comment on the matter.
In protest of the recent fall, general investors staged demonstrations in front of the DSE building on the last three days.
Investors say low performance of listed companies and lapse monitoring on the part of the stockmarket regulator has intensified the recent fall. They urged the chairman of the BSEC to resign.
According to DSE data, Grameenphone dominated the turnover chart with 4.90 lakh shares worth Tk 17.57 crore changing hands, followed by Monno Ceramics, Fortune Shoes, Reckitt Benckiser, and United Power Generation.
Rupali Life Insurance was the day's best performer with a 9.96 percent gain, while Heidelberg Cement was the worst loser, shedding 16.45 percent.
Of the traded issues, 64 advanced, 231 declined and 53 securities closed unchanged on the premier bourse.
Chittagong stocks also fell yesterday with the bourse's benchmark index, CSCX, declining 99.49 points, or 1 percent, to finish the day at 9,779.74.
Losers beat gainers as 141 issues declined and 55 advanced while 34 finished unchanged on the Chittagong Stock Exchange. The port city bourse traded 37.21 lakh shares and mutual fund units worth Tk 12.10 crore.