Market PE hits nine-year low

The market price-earnings ratio came down to 10.60 in April, the lowest since 2004, as the recent political unrest dented investor confidence.
The overall market PE ratio was at 10.07 at the end of July 2004, according to the Dhaka Stock Exchange.
The market lost 11.34 percent this year.
The PE ratio came to this point due mainly to a lack of confidence among investors, said Ahasanul Islam, a former vice president of the DSE.
"Although the existing PE ratio suggests that the market has become attractive for investment, it has failed to attract investors."
He said margin loan is the main problem now as most of the loans got stuck due to a series of downtrends in the last couple of years.
The PE ratio determines the time an investor needs to wait to get back the invested amount. It is an indicator for considering the extent of risks an investment might entail.
The PE ratio is the valuation of a company's current share price compared to its earnings per share.
The indicator is also important to better understand what happens in the market after a large gain or decline. It is also one of the best gauges to know how expensive or cheap the overall stockmarket is at a certain moment.
The continuous downtrend not only pulled down the PE ratio to a record low, but also eroded confidence, said Mahmood Osman Imam, who teaches finance at Dhaka University.
"Many of the investors got stuck with margin loans, while others are not injecting fresh funds fearing further losses," he said, adding that most of the institutional investors are also on the sidelines.
Unless the institutional investors actively participate in the market, the expected hype will not be created among the retail investors, said Fakhor Uddin Ali Ahmed, a former president of the Chittagong Stock Exchange.
He urged political parties to think alternatives to shutdowns for the sake of the economy.
The overall market PE ratio hit the highest record at 30.58 at the end of February 2010.
A recent survey conducted by LankaBangla Securities, a stockbroker, found that political instability poses the biggest risk to the economy and the capital market in 2013.

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