Stocks suffer biggest fall in 4.5 years

The country's premier bourse saw its biggest fall in four and a half years yesterday as political unease looms large on investors' minds.

The DSEX, the benchmark general index of the Dhaka Stock Exchange, shed 133.15 points -- or declined 2.21 percent -- to close the day at 5,888.29, the lowest in three months.

The sharpest slide the bourse last witnessed was on June 9 in 2013 when the index dropped 145 points.

"The investors were in a selling mode fearing further fall ahead of the February 8 verdict in a graft case against Khaleda Zia," said Khairul Bashar Abu Taher Mohammed, secretary general of the Bangladesh Merchant Bank Association.

The DSEX has been on a descent since January 25, when it stood at 6,215.80 points.

Azam J Chowdhury, chairman of the Bangladesh Association of Publicly Listed Companies, differed with Mohammed's view that the likelihood of political instability led to the crash.

"The economy has been performing consistently for the last 15 years in spite of political uncertainty. It can't impact the market so much," he added.

Top brokers termed yesterday's crash a self-fulfilling prophecy: investors were in anticipation of a market crash, so to safeguard themselves from major losses they sold on their shares and in so doing, brought about the crash.

"The price index crashed over the rumour that the market will fall further," said Mostaque Ahmed Sadeque, president of the Dhaka Stock Exchange Broker Association.

Sadeque went on to blame the institutional investors for fanning the flames.

"They created panic in the market. They did not provide buying support to stop the panic sale," he added.

Mohammed said a negative psychology has developed in investors' mind over the lowering of banks' loan-deposit ratio ceiling.

On January 30, the central bank lowered conventional banks' loan-deposit ratio by 1.5 percentage points to 83.5 percent and Islamic banks' by 1 percentage point to 89 percent.

The new ceiling will be effective from June 30, leaving many banks scuppering for deposits such that they can gradually bring down their ratio.

This has pushed the interest rate on deposits, said a top executive of a private bank. Banks are now offering up to 9 percent interest rate for deposits, in contrast to less than 5 percent a couple of months back.

"The continuous fall of the index has been triggered by the liquidity crisis persisting in the market and the moderate political tension over the upcoming election," said EBL Securities in its daily market analysis. Selling pressure was seen on stocks from banks, financial institutions, and engineering sectors, according to EBL Securities.

Turnover, which indicates how bustling the day was, rose 10.76 percent from the previous session to Tk 364.90 crore as 11.09 crore shares changed hands.

National Bank was the day's most traded stock with its transaction of 1.31 crore shares worth Tk 17.21 crore, followed by LankaBangla Finance, Square Pharmaceuticals, Beximco Pharmaceuticals, and Alif Industries.

Berger Paints Bangladesh was the day's best performer with a gain of 4.99 percent, while Midas Financing was the biggest loser, shedding 7.99 percent.

Losers outnumbered gainers by 302 to 23, while 11 securities remained unchanged on the DSE.

It was the same story over at the port city, where the key index lost 243.80 points to close at 11,005.76.