Of the 348 companies listed on the Dhaka Stock Exchange, 23 traded below their face value as of yesterday -- an alarming development for the market that is already low on confidence.
Eleven of the companies are from the textile sector and seven from the financial sector.
Historically, most of the companies de-listed from the market are from the textile sector, according to Abu Ahmed, a former chairman of Dhaka University's economics department.
Normally, finance stocks are considered good bets, said the managing director of a merchant bank requesting anonymity. So, the large number of finance companies trading at lower or close to their face value is an anomaly.
“Investors' confidence in financial institutions is not very good due to the huge bad loans in the sector,” said Ahmed, now a stock market analyst.
At the end of the third quarter of 2018, banks' non-performing loans went close to Tk 1 lakh crore -- the largest yet in Bangladesh's 48-year-history, according to data from the Bangladesh Bank.
The amount of bad loans increased 11.23 percent between the months of July and September to Tk 99,370 crore.
Due to the huge bad loans, some of the stocks sank to lower than their face value while many are trading close to the standard face value of Tk 10, said Ahmed.
Of the seven stocks trading below their face value, one is a bank (ICB Islamic Bank) and six are non-bank financial institutions (Bangladesh Industrial Finance Company, Fareast Finance, First Finance, Peoples Leasing, Premier Leasing and Prime Finance). Some 23 NBFIs are listed.
Not only that, of the 30 banking stocks, 11 are trading between Tk 10 and Tk 15. Non-performing loans caused capital shortage in some of the banks and NBFIs, which created a fright among investors, said Khairul Bashar Abu Taher Mohammed, secretary general of the Bangladesh Merchant Bankers' Association.
“This fund crisis hit the confidence of investors despite the good earnings by the sector,” he added.
The general sentiment among investors is that the banks and NBFIs' toxic loans are bigger than what the institutions have shown in their balance sheets, said the managing director of the merchant bank.
The pessimism has spread into the mutual funds sector: Out of the 37 mutual funds, 34 are trading at lower than face value.
It was the textile sector though that traditionally bore the cynicism of investors.
Of the 53 listed textile companies, 11 are trading below face value. The companies are Alif Manufacturing, C&A Textile, Dacca Dyeing, Delta Spinners, Familytex, Generation Next, Maksons Spinning, Metro Spinning, RN Spinning, Tallu Spinning, and Tung Hai Knitting.
Market insiders said some of the listed textile companies are suffering from lower growth and some of them cursed because of the conditions set by the Accord and the Alliance, the two western buyers' agencies working to improve workplace safety in Bangladesh's garment sector.
Besides, Federal Insurance, Beximco Synthetics, Keya Cosmetics, United Air and BD Service are also trading at lower than Tk 10.