DSE: Asia's worst loser in July

Dhaka Stock Exchange became the worst performer in Asia in July, losing 9 percent in the month, according to Bloomberg data.
China's CSI 300 Index was the second worst performer with a 5 percent fall.
DSE, the premier bourse of Bangladesh, continued its bearish run in the last few months as big portfolio investors adopted a go-slow policy amid a volatile stockmarket, said Md Moniruzzaman, managing director of IDLC Investment Ltd.
Performance of the banking sector, which covered 30 percent of total market cap, was depressing in the last few months due to low business growth, credit crisis and poor corporate declarations, he said.
According to half-yearly declarations, earnings of the banking sector declined by 9.4 percent compared to the previous half year, as most of the banks came up with higher provisioning during this quarter, said LankaBangla Securities, a stockbroker.
The central bank's new loan rules also depressed the sector, Moniruzzaman said.
As per the new loan rules, which came into effect from July 1, the ongoing loans will be classified as bad loans within three months of non-payment of an instalment, instead of the six-month timescale in the previous rules.
He said margin loan holders are the active investors in the market and their equity is in the negative territory now.
Turnover at the DSE was also very low in the last few months, as buyers refrained from making new investments due to a lack of confidence, he said.
“The slowing export growth is creating a huge pressure on corporate profitably of different sectors. Tight monetary regime has substantially curbed the money supply growth and economic activities,” said Md Ashaduzaman Riadh, head of research department at LankaBangla Securities.
A low rate of LC (letter of credit) opening, declining loan disbursement and a rise in non-performing loans would hamper the profitability of the banks and investors, Riadh said.
He also said the finance minister's repeated comments trivialising the stockmarket have also frustrated the investors.
Finally, the World Bank's cancellation of the Padma bridge loan has added weight to the drowning sentiment of the investors, he said.
According to Riadh, the recent decline in the inflation rates over the past couple of months is encouraging and if the trend continues, the banking regulator is expected to adopt flexible monetary policy by cutting interest to boost liquidity.
The benchmark index of the Dhaka bourse, DGEN, fell 26 percent last year, while the value and volume dropped by 74 percent and 59 percent respectively.

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