Market’s recovery hope fades as stocks’ steep plunge continues

Dhaka stocks plunged on a massive scale this week as investors’ confidence remained jittery due to macroeconomic worries further fueled by a government move to slash the country’s proposed gross domestic product (GDP) growth target for the current fiscal year.

The prolonged bearish market sentiment coupled with the floor price system frayed investors’ nerves, prompting them to liquidate their holdings, and making them reluctant to take fresh bets in the market, analysts say.

Following severe criticism over the floor price system, the Bangladesh Securities and Exchange Commission (BSEC), the securities regulator, lifted the floor price from 169 listed companies and mutual funds

The stock regulator on Wednesday issued an order in this regard by signaling an end to the regulatory intervention in the share price mechanism.

The floor price system which still is in place for many would not be applicable for the selected 169 securities, as per the BSEC order.

But just after the day the regulator issued this order, the Dhaka Stock Exchange (DSE), the country’s premier bourse, recorded Tk 227 crore in turnover on Thursday, the lowest in the last 29 months.

Earlier, the finance ministry on Tuesday lowered the proposed GDP growth target to 6.5 per cent for the fiscal 2022-23.

The proposal for lowering the GDP target from the earlier projection of 7.5 per cent came at the ministry’s coordination meeting on the Fiscal, Monetary and Exchange Rate.

The DSEX, the benchmark index of the DSE, went down by 54.61 points or 0.87 per cent to settle the week at 6,202.

Among other indices, the DS30, the blue-chip index, plunged 13.97 points to close at 2,194, and the DSES, the Shariah-based index, shed 15.32 points to finish the week at 1,357.

Turnover, another crucial market indicator, averaged out at Tk 336 crore this week at the prime bourse which was 31.54 per cent down against the daily average turnover in the last week.

Pharmaceutical sector topped the turnover chart with a contribution of 17.51 per cent to the total DSE turnover.

Alongside the macroeconomic strains, the dismal earnings projections of the listed companies also weakened investors’ confidence to take fresh bets in the market, said EBL Securities, a stockbroker, in its daily market review.

The market performed five sessions this week with starting the first session by giving up 0.18 per cent on Sunday.

It remained negative on both Monday with 0.11 per cent loss and Tuesday with 0.20 per cent loss.

The market also stayed negative on Wednesday as it gave up 0.44 per cent on the day, but on the closing day of the week on Thursday, the DSE reported a 0.05 per cent gain.

Financial sectors posted mixed performance this week with the NBFI booking the highest gain of 0.04 per cent, followed by general insurance (0.01 per cent).

On the other hand, the life insurance suffered the most with a loss of 0.56 per cent, followed by bank (0.28 per cent), mutual fund (0.06 per cent), according to Brac-EPL’s weekly market commentary.

UCB Stock Brokerage in its weekly market review said the travel and leisure, general insurance and NBFI sectors closed positive this week, while the jute, IT, and paper & printing sectors faced correction.

The week witnessed a downward trend in as investors’ confidence weakened due to depressing macroeconomic outlook and dismal earnings projections of the listed companies, commented EBL Securities.

The prolonged bearish sentiment in the market exacerbated by the government’s decision to slash the GDP growth target for FY23 by 1 per cent which added fuel to the prevailing concerns over the sluggish economic output of the country, it further said.

Moreover, the regulator’s decision to withdraw floor prices from certain scrips put further strain on the ailing market with the 1 per cent lower circuit breaker was yet to lure investors’ participation at the current prices, EBL Securities stated.

The BSEC remove the floor prices from some certain securities as shares of most of the companies still have been stuck at their floor prices, making investors averse to liquidating their holdings, consequently creating a liquidity crunch in the market.

Out of the issues traded, 19 advanced, 147 declined, and 215 remained unchanged on the trading floor of the Dhaka bourse this week.

Sea Pearl Beach Resort was the week’s top gainer with a price jump of 12.3 per cent, while Orion Infusion was the week’s worst sufferer with a loss of 26.6 per cent.

The port city’s stock exchange, the Chittagong Stock Exchange (CSE), also closed lower this week with its two major indices – the CSCX and the CASPI – declining by 0.64 per cent and 0.64 per cent respectively.