Stocks continue to bleed

The stock market continues to bleed due to tensions between the regulator and the Dhaka Stock Exchange, claims of unpaid dues of heavyweight Grameenphone, the looming deadline to bring down banks’ loan-deposit ratio and the ongoing liquidity crunch.

The Bangladesh Securities and Exchange Commission (BSEC), however, said they can only provide policy support but cannot force people or institutions to invest in stocks.

DSEX, the benchmark index of the Dhaka Stock Exchange, suffered losses for a fourth straight session yesterday and investors are shaken to see the lukewarm response of the regulator and DSE to deal with the plunging stock prices.

The index lost 37.14 points to close at 5,033.53 yesterday. In the last four trading sessions it gave up a total of 145.17 points.

In the last two weeks, the DSE lost nearly Tk 8,080 crore in market capitalisation.

Market analysts said the index is coming down to the 5,000-mark, which is not a good sign because if it slips below the mark it may have a psychological impact on the investors’ mind and they might panic sell.

Default loans of the banking sector are rising and banks are suffering from a liquidity pressure, said Mohammed Rahmat Pasha, managing director of UCB Capital Management.

So, investors are reluctant to put in money in banking stocks, he said, adding that the recent gas price hike will increase the cost of the manufacturing sector and thus shrink their earnings.On this ground, investors are less interested in the manufacturing sector too.

The initial public offering of Ring Shine Textile is also creating sell pressure from institutional investors, he added.

The textile company got the go-ahead to raise Tk 150 crore from stock investors by offloading 15 crore shares. Institutional investors are snapping up most of the stocks being offered.

Market insiders said many other factors have dented investor confidence in the last few months, so the market has been plunging.

The difference between the Bangladesh Securities and Exchange Commission and the DSE over a recent IPO has been affecting the overall market, said a senior merchant banker requesting not to be named.

The hard decisions of the telecom regulator on Grameenphone, the largest listed company on the DSE, hurt investor confidence too. The Bangladesh Telecommu-nication Regulatory Commission (BTRC) decided to issue show-cause notices to Grameenphone, asking why its licences would not be cancelled for not paying dues amounting to more than Tk 12,000 crore.

Such a decision without informing the stock market regulator is creating mistrust among investors. As most of the investors of Grameenphone are foreign and institutional ones, their sell-off sank the market, according to insiders.

Grameenphone alone snatched 14 points from the DSEX yesterday.

A top official of a leading stock broker said, as the financial sector has been suffering from a liquidity crunch for the last few months, they are reluctant to invest in the market.

Another stock broker said a mistrust has cropped up among stock investors after the listing of Coppertech, a company with irregular financial statements.

Subsequently, the premier bourse declined to list the stock but the regulator overruled the decision.

A top official of a merchant bank said investors are criticising the BSEC as their work is not up to the mark, especially in case of giving approval for IPO and failure to bring well performed companies.

However, no one is asking the commission for their activities.

Saifur Rahman, spokesperson of the BSEC, said the regulator has given many policy support to the market to boost investor confidence after discussions with the stock brokers and merchant bankers.

“We can only provide policy support to investors but even then they are not investing. You can ask them why they are still not investing,” he added.

The DSE data shows two other indices also ended lower. The DS30 index comprising blue chips fell sharply by 16.42 points to finish at 1,775 and the DSE Shariah Index lost 5.96 points to close at Tk 1,172.

However, turnover of the DSE rose 37 percent to Tk 442.90 crore.

Losers outnumbered gainers as out of 354 issues traded, 209 closed lower, 100 ended higher and 45 remained unchanged on the DSE trading floor.