The year 2023 was a complete mess for the stock business and a year of disappointment for the stock market as the average turnover and foreign investment reached rock bottom, which was never encountered by investors at such a bad time after the collapse in 2010.
The capital market also felt the heat as the core index of the country’s premier bourse plunged below the psychological threshold of 6,000-mark, forcing the stock market regulator to reinstate the floor price at the end of July 2022, which is still effective.
As of Thursday, DSEX, the key index of the Dhaka Stock Exchange (DSE), ended at 6,246.49 points on the last trading day of 2023, which was 6,206.81 points on the first trading day of the outgoing year.
This year the DSE’s average daily turnover fell by 39.83 per cent to Tk 578 crore. It was Tk 960 crore in the previous year.
Market capitalisation to GDP ratio declined to 17.59 per cent in the outgoing year, down from 19.14 per cent in 2022.
Talking to the Business Post, DSE Brokers Association of Bangladesh (DBA) president Saiful Islam said the year 2023 was a big challenge for the overall economy, and the stock market was not immune to this challenge.
He also said that the big problem in the market was the floor price imposed by the stock market regulator. This results in low-volume trades in the market. There was no new investment. No return was found. The income of all stakeholder groups in the market has declined. All this has created constraints on the capacity of the stock exchanges.
Saiful, also a director of BRAC EPL Stock Brokerage Ltd, said that the number of new good IPOs coming up should be increased next year. “Let the market take its course.”
He believes that investors' confidence can be restored if the floor price is quickly withdrawn and the trade volume increases in the market.
Managing director of the Dhaka Stock Exchange Dr. ATM Tariquzzaman told the Business Post that corporate governance should be given utmost importance to eliminate the market confidence crisis.
“In the new year, there will have expectations that the regulatory body withdraws the floor price from the market,” he added.
The overall price earnings (P/E) ratio rose to 15.77 at the end of 2023.
Experts said foreign investment in the country’s premier bourse remained positive for only three months of the outgoing year as overseas investors faced a number of issues, including political uncertainties in the election year, depreciation of taka, against the US dollar and woes in the country’s banking sector.
They also said that the obstacles which prevented investors from entering the market must be addressed. In this case, a good company has to pay the premium according to their respective eligibilities.
Apart from lack of confidence in the regulator, investors have been grappling with a number of issues, including rising non-performing loans and liquidity shortage in the financial sector.
Other reasons are sell-offs by foreign investors and investors' lack of confidence for long because of disappointing data on major macroeconomic indicators.
The national election in Bangladesh is scheduled for January 7, 2024.
In 2023, stocks of fundamental and multinational companies (MNCs) were disappointing investors as their capital gains remained poor, while shares of many small-cap firms continued to rise sharply on the Dhaka bourse, an indication of investors believing they have hit potential.
There are 13 multinational companies listed on the Dhaka Stock Exchange (DSE)–the country's premier bourse, and stock investors have not yet earned any capital gains from their investments from seven of these companies in the last six months.
The listed MNCs had displayed an extremely bleak performance back in 2022, with a 14 per cent negative equity return.
Meanwhile, shares of many small-cap companies continued to rise sharply in the country’s prime bourse in the last six months, with stocks of most large-cap firms remaining stuck at floor prices.
Commenting on the recent market trend, AB Mirza Azizul Islam, former finance advisor to the caretaker government, told The Business Post, “This is not a good sign for the capital market. Those who buy junk shares should be investigated.”
“The securities regulator should take legal action against price manipulators.”
On July 28, 2022, the BSEC imposed floor prices on all securities to prevent shares from falling beyond a certain level amid the domestic and global macroeconomic strains.
The share prices of most companies have been stuck at their floor prices for an extended period of time, pushing investors towards liquidating their holdings and thus creating a liquidity crisis in the markets.
Earlier in March 2020, the securities regulator took a similar move to limit the free fall of shares following the global pandemic, when the DSEX fell below 3,000 points.
The BSEC chairman has repeatedly said that they had no alternative but to introduce the floor price mechanism to protect the interests of small investors and that the mechanism would not be withdrawn in the immediate future.
The ongoing Russia-Ukraine war, which started in February last year, spilled over its adverse effects across the globe, causing currency volatility, high inflation, and price hikes of all goods and raw materials in the global market.
