Stocks see year’s steepest fall on gain tax fear

After a steady bullish trend for the past two months, Dhaka stocks suffered the year’s sharpest single-day crash on Tuesday, as investors became nervous following the tittle-tattle over the imposition of capital gain tax on investments in the secondary market.

The DSEX, the benchmark index of the prime bourse Dhaka Stock Exchange (DSE), sank 40 points or 0.63 per cent to settle at 6,316 against 6,356 in the previous trading session.

This decline marks the sharpest drop for the major equity benchmark since November 20 of last year, when it had fallen by 0.81 per cent.

Among other indices, the DS30, the blue-chip index, fell by 9.5 points or 0.43 per cent to close at 2,188, and the DSES, the Shariah-based index, plunged by 10 points or 0.72 per cent to 1,372.

All the large-cap sectors posted negative performance on the day.

Despite the market remaining flat till the mid-session, the sale pressure continued to mount across the trading floor during the second half of the trading session, prompting panic-stricken investors to liquidate their holdings and remain aside from the current volatility in the market, according to market insiders.

Turnover, another crucial market indicator, plummeted by 13.51 per cent to Tk 1,087 crore, against the tally of Tk 1,256 crore in the previous session.

The life insurance topped the turnover chart with a contribution of 17.72 per cent of the total turnover of the DSE.

Dhaka stocks faced a sharp selloff owing to rumor-based sale pressure across the bourse, as investors were anxious regarding the news on the imposition of capital gain tax on secondary market investments as well as the prevailing concerns regarding macroeconomic uncertainties, said EBL Securities, a stockbroker, in its daily market review.

Income tax officials, however, said no decision was taken yet to scrap the previously issued statutory regulatory order (SRO) that currently provides tax relief from capital gains.

Muhammad Ali, a stock market expert and managing partner of Ali Zahir Ashraf & Company, said tax benefits for individual investors are still in place as before. As per a SRO issued on June 30, 2015, individual investors are exempted from tax on capital gains. Another fresh SRO needs to be issued to cancel the existing facility. But nothing related to the issue happened yet.

Finance Minister AHM Mustafa Kamal on Thursday last placed a Tk 7.6 trillion national budget for the fiscal year 2023–24 before the Parliament with a focus on tackling skyrocketing inflation, employment generation, the fourth industrial revolution, and ultimately building a smart Bangladesh.

Market insiders said the proposed budget has given neither good nor bad news to capital market investors.

Although stakeholders demanded some provisions in the new budget to woo investors as well as bring good firms to the market, most of their urges remained unheard in the proposed budget.

They believe the budget has not reflected the requirements of the stock exchanges, brokers, merchant bankers, listed companies, and investors.

Meanwhile, Dhaka Stock Exchange (DSE) Chairman Professor Hafiz Muhammad Hasan Babu on Tuesday put forth a series of proposals, and requested the government to reconsider those in the final budget for the fiscal year 2023-24.

Professor Hasan Babu, at the press briefing, placed seven key proposals, and said those were required for ensuring the vibrancy in the market.

The implementation of these proposals is expected to generate positive outcomes for the country’s capital market and for the overall economy. By fostering a more dynamic private sector, attracting both domestic and foreign investors, and creating an investment-friendly environment, the country can experience sustainable economic growth, the DSE chairman said.

According to the DSE chairman, the current state of the country’s capital market is characterised by a lack of confidence among investors. They seem hesitant, taking two steps forward and one step back, Professor Hasan Babu, said.

Most sectors displayed dismal returns yesterday, with the travel facing the highest loss of 4.2 per cent, followed by IT (3.7 per cent) and cement (3.7 per cent).

On the other hand, the mutual fund posted a paltry gain of 0.1 per cent, followed by and bank (0.1 per cent).

Out of the securities traded, only 26 stocks advanced yesterday, while 156 issues declined, and 210 scrips did not see any movement on the DSE trading floor.

Trust Islami Life Insurance topped the gainers’ chart of the DSE with a return of 9.9 per cent, while Mir Akhter Hossain was the highest loser, shedding 10 per cent.

The port city bourse, the Chittagong Stock Exchange (CSE), also settled on red terrain, with its two major indices – the selected indices (CSCX) and the all-share price index (CASPI) – declined by 65.7 points and 109.5 points respectively.