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Deeper in red as DSEX sinks to 10-month low

Investors dump shares fearing economic slowdown
Staff Correspondent
17 May 2022 00:00:00 | Update: 17 May 2022 01:21:04
Deeper in red as DSEX sinks to 10-month low

The share prices all across the board fell like ninepins. The meltdown continued with the benchmark DSEX sinking by 2 per cent or 134 points, dragging the index to a nearly 10-month low.

At close on Monday, the index settled at 6,430—the level not seen since July 29, 2021 and it saw the biggest single-day fall since March 7 when it tanked 182 points. With the fall, the index extended losses for the fourth straight session.

It was the disturbing economic numbers that weighed on the minds of investors, analysts say. The depleting reserves, falling remittances, soaring inflation and balance of payment deficit remained a major cause of concern, they added.

The bourse was under severe selling pressure right from the opening bell, with DSEX losing 79 points and sinking to 6,486 within the first 30 minutes.

Following a brief respite, the market continued its downward trajectory again, reaching the day’s low at 6,416.

The market capitalisation of the Dhaka Stock Exchange has eroded by a staggering Tk 9,291 crore to Tk 5,21,761 crore, wiping off a large amount of investors’ investments.

The benchmark’s junior indices—the Shariah-based DSES index was down 21 point or 1.52 per cent at 1,410, while the blue-chip DS30 index declined 41 points or 1.7 per cent at 2,365.

“A variety of local and international factors were behind the dip,” said an analyst at a top investment bank. “As a result of this, investors are selling shares in panic,” he said.

The reserve dropped by $6 billion to $41 billion in more than eight months, putting pressure on the balance of payments, according to the Bangladesh Bank.

The imported commodity prices rocketed as local currency continued to slide against the greenback. Other commodities sourced from the region such as wheat was also sharply higher caused by India’s recent ban on the commodity.

Inflation hit a 17-month high at 6.22 per cent in March driven by rising food prices caused by the global uncertainties ensuing from the Ukraine war and supply chain disruptions.

In a note, the EBL Securities also linked the stock plunge with the dismal macrocosmic scenario. “Dhaka stocks observed a major setback as most of the investors rushed to sell shares and exit the market downfall amidst concerning macroeconomic views in the major economies of the world,” it said.

The majority of the investors sought risk reduction by dumping their holdings amid global macroeconomic turbulence that forced central banks to hike interest rates to combat inflation, it added.

In the events, conservative policies from the government to safeguard dwindling forex reserve made investors further anxious on the bourse, according to the analysis of the brokerage firm.

News on ICB’s returning money taken from different banks also accelerated the market’s fall, according to dealers.

As of March 31, the state-owned financial institution’s loan stood at about Tk 1,303 crore in loans from several banks and non-banking financial institutions.

World governments had until now not included Russian oil in their wide-ranging sanctions on Moscow owing to concerns about the impact on prices and consumers, though trade has become increasingly tough as banks pull financing and shipping costs rise.

The International Monetary Fund recently warned that the war and sanctions on Russia will have a “severe impact” on the global economy.

After three decades of basically no rise at all, inflation in Japan this year is expected to hit 2 per cent -- a key policy goal as the central bank tries to lift the nation out of deflation, according Nikkei Asia.

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