Stocks display worst-ever showing in first quarter

Stocks delivered their worst first quarter of a year as nervous investors went for massive selloffs, initially prompted by anti-market measures and then by the fast-spreading coronavirus, which dealt a heavy blow to the economy and businesses at home and abroad.

The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), plunged 849 points, or 19.07 per cent in the January-March quarter, to display the most dismal first quarter in its history.

The index began the year on a high note at 4,453 but because of the coronavirus-induced panic, it nosedived to 3,603 on March 18, the lowest since May 12, 2013.

This prompted the regulator to step in to prevent further slides. The Bangladesh Securities and Exchange Commission (BSEC) set the floor price of all stocks by calculating their last five days' average prices. This allowed the index to avoid further slides although analysts say the price was not market-driven.

The index ended at 4,008 on March 25, the last trading session before the closure of the trading owing to the ongoing countrywide lockdown.

The DSE30, the blue-chip index that comprises well-performing stocks, ended the quarter at 1,323.77, down 19.83 per cent from its January start.

The benchmark index of the Chittagong Stock Exchange (CSE) was down 18.96 per cent in the first quarter. The broad index of the port city bourse stumbled 1,553 points to close at 6,859.9.

The stock market had been on a downward trend for the last few months, prompting the prime minister to order banks to buy stocks to boost investor confidence.

But most lenders did not oblige. As a result, investor confidence was hit and the key index was sent tumbling, said Mostaque Ahmed Sadeque, a former president of the DSE Brokers Association of Bangladesh.

With this backdrop, the coronavirus made its entrance and has since ravaged economies the world over for the last three months with Bangladesh's economy being one of its latest victims.

Because of the COVID-19 fallout, stocks fell further, Sadeque said.

Globally, the virus has killed more than 48,320 people and infected more than 952,171. Some 180 countries are affected with the virus, according to data compiled by Johns Hopkins University. 

In Bangladesh, 56 people were infected when this report was written while six deaths were linked to the deadly pathogen.

With the latest hit, stocks of multinational companies did not see buyers amid the mounting fear of economic uncertainty, said Sadeque, also the managing director of Investment Promotion of Services, a brokerage house.

The market was already sinking and the COVID-19 outbreak only intensified the plunge, a merchant banker said.

Most listed companies shut down their factories due to the ongoing countrywide lockdown. Many of these businesses will be adversely affected after reopening their operations due to the shrinking economy, he said.

Bangladesh's gross domestic product may contract by as much as 1.1 per cent in the hypothetical worst-case scenario of a significant outbreak of coronavirus in the country, said the Asian Development Bank in an analysis in the first week of March.

Not only the stock market in Bangladesh fell: markets are suffering in other parts of the world such as the US as well.

The Dow Jones Industrial Average, an index that measures the stock performance of 30 large companies listed on stock exchanges in the US, lost 7,925 points, or 27.45 per cent during the quarter, which is the gloomiest first quarter in its 135-year history.

The US market was overvalued after it was on the brink of collapse following the coronavirus pandemic. But in Bangladesh, the stock market was already at a very low stage before the virus began to spread due to panic among investors, said Shahidul Islam, CEO of VIPB Asset Management, a fund manager in Bangladesh.

"The country's stock market saw a depressed first quarter due to the panic among investors and COVID-19."

Bangladesh's economy has been growing at higher rates but its stock market is falling. This is because the country's many anti-market measures shocked foreign investors, Islam said.

Islam cited the measures related to Grameenphone and the telecom regulator tussles and the imposition of 6 per cent and 9 per cent as deposit and lending rates respectively.