The insurance sector may not play a major role in the overall economy of Bangladesh, but to the capital market investors, the share value of this industry is significantly higher.
The sector's stocks dominated the gainers' chart. In contrast, top large-cap stocks virtually yielded no returns on the Dhaka Stock Exchange (DSE) in 2023, indicating that investors believe they have hit their potential.
General insurance and life insurance emerged as the second-best performers on the Dhaka bourse last year, boasting a 10 per cent and 5 per cent surge in their market value respectively. Meanwhile the banking, IT, and textile sectors became the lowest performers.
Companies with sound fundamentals in FMCG, pharmaceuticals and chemicals, banking, and insurance are expected to stand out in 2024, and companies in engineering, construction, and textiles may report earnings recovery, according to a yearly review by EBL Securities Ltd – a leading stockbroker firm.
Among the 20 sectors, general insurance accounted for 10 per cent and life insurance for 9 per cent, totalling 19 per cent of the annual turnover of the Dhaka Stock Exchange last year.
Speaking to the Business Post on condition of anonymity, a top brokerage firm official said, “This upward trend in the sector comes after the regulator proposed making insurance mandatory for all types of vehicles, pulling investors to the stocks of general insurance companies, since the move is expected to have a positive impact on them.”
Last year, on insurance day, Prime Minister Sheikh Hasina directed to ensure that no uninsured vehicles ply the streets. Later, the Insurance Development and Regulatory Authority (IDRA) sent a proposal to the finance ministry to take an initiative to amend the Road Transport Act 2018.
It should be noted that shares of Khan Brothers PP Woven Bag Industries Ltd soared over 600 per cent in the last year, even though the low-performing company has been incurring losses.
Khan Brother PP Woven Bag Industries was the top gainer with a 676 per cent surge, followed by newly listed company Trust Islami Life Insurance 451 per cent, Khulna Printing 236 per cent, RN Spinning Mills 161 per cent, Fine Foods 124 per cent, Crystal Insurance 114 per cent, Emerald Oil 113 per cent, Shyampur Sugar Mills 106 per cent, Deshbandhu Polymer 104 per cent, and Prime Finance First Mutual Fund 102 per cent.
On the other hand, the travel and leisure sector suffered a 25 per cent decline, the highest in market capitalisation this year, led by sector-heavyweight Sea Pearl Beach Resorts. The company emerged as the worst performer as a single issue this year. Its stock saw a 46 per cent decline.
Among the 58 insurers listed on the DSE, 43 are general insurance and 15 are life insurance.
On its debut trading week, Trust Islami Life Insurance Ltd emerged as the best-performing initial public offering (IPO) in 2023, boasting a 93 per cent return, followed by Capitec Grameen Bank Growth Fund with a return of 76 per cent, and Midland Bank with a minimal return of only 2 per cent.
The volume of business in Bangladesh is increasing day by day, and business risks such as accidents, hazards, perils, fire, and theft will also increase simultaneously. The issuer is doing business in an industry where demand for insurance coverage to reduce business risk is highly required.
Currently, the economy of Bangladesh is emerging, and the demand for insurance coverage has substantially increased. The last five years of business performance by the issuer have revealed that the current business environment is favorable for the sector, industry insiders said.
Insurance companies are required to have a minimum paid-up capital of Tk 40 crore and a maximum sponsor shareholding of 60 per cent. Local insurance companies are required to be listed in the capital market within three years of incorporation.
The time may be extended for two years with the approval of the authority.
