Dhaka bourse’s index hit a two-and-a-half-year low yesterday after sinking for seven days straight as investors continue to stay away from the market for lack of confidence.
DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), shed 88.01 points to close at 5,091.48, the lowest since January 1, 2017.
Since the budget was passed in the parliament on June 30 with harsh provisions for the stock market, DSEX lost 330.14 points and Tk 21,075 crore.
This has compelled aggrieved retail investors to demonstrate in front of the DSE office yesterday.
They said the government has taken many steps recently that ultimately went against the listed companies and when listed companies are hurt the investors would also be hurt.
Furthermore, banks and non-bank financial institutions are suffering from liquidity pressure, so their participation has remained subdued.
Market insiders said foreign investors are selling off their shares due to the lack of confidence and depreciation of local currency against the US dollar.
These, along with the announcement of liquidation of People’s Leasing and Financial Services, have drained general stock investors’ confidence.
The liquidity crisis in financial institutions is the main reason behind the erosion of investors’ confidence, said Mizanur Rahman, a professor of the Accounting and Information Systems of the Dhaka University.
“It is necessary to take initiatives to address the liquidity crisis,” he said, adding that the confidence crisis was compounded by PLFS’s liquidation as investors will lose almost all their money.
A top official of a leading stock broker said a harsh decision on Grameenphone, the largest listed company of the DSE, by the telecom regulator ultimately affected the whole stock market.
The telecom regulator’s move to declare Grameenphone a significant market power (SMP) in February has played a huge role in dampening the confidence of stock investors, he added.
As an SMP, higher charges will be applied on Grameenphone, which will squeeze the business growth of the country’s leading mobile phone operator.
Already, the telecommunication company’s earnings per share (EPS) in the last quarter dropped and so did its interim dividend.
The EPS dropped to Tk 7.07 from 7.70 in the second quarter of this year. Its half yearly interim dividend dropped to 90 percent from 125 percent a year earlier.
In the last five months, Grameenphone’s stocks plunged 22 percent to Tk 324.
“A large company’s impact is also very large on the market,” the official said.
UCB Capital in its daily market commentary said Grameenphone’s regulatory tussles along with lower dividend pay-out have left investors jittery.
“So, Grameenphone topped the turnover chart as concerned investors continued to sell their stakes,” it added.
The decision to impose tax on stock dividend and reserves would ultimately hit the listed companies, so the stock investors are reacting negatively, said a top official of a leading merchant bank requesting not to be named.
“Imposing a tax can never be an incentive for cash dividend but providing tax rebates would have been,” he added.
In the budget for fiscal 2019-20, a 10 percent tax has been prescribed for companies that give out stock dividend more than the cash dividend and holds on to more than 70 percent of their earnings in a year in order to promote cash dividend.
The following decisions impacted the investors’ confidence, he added.
Rahman said they urged the government to relax the corporate tax rate for listed companies but it was not honoured.
Moreover, the budget has no stock market friendly policy, he added.
Yesterday, turnover of the DSE fell by a staggering 13.6 percent from previous session to stand at Tk 306.06 crore.
Of the traded issues, 37 advanced and 303 declined with 12 securities closing unchanged.
Grameenphone dominated the turnover chart with its transaction of 3.74 lakh shares worth Tk 12.32 crore, followed by Monno Ceramics, Fortune Shoes, Square Pharmaceuticals and United Power Generation.
Meghna Pet Industries was the day’s best performer with its 9.90 percent gain, while Bangladesh Industrial Finance Company was the worst loser, shedding by 10 percent.
Chattogram stocks also fell with the bourse’s benchmark index, CSCX, declining 157.23 points, or 1.63 percent, to finish the day at 9,487.98.
Losers beat gainers as 220 declined and 40 advanced, while 18 finished unchanged on the Chittagong Stock Exchange.
The port city bourse traded 62.27 lakh shares and mutual fund units worth Tk 14.40 crore.