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Weekly analysis: Stocks slip back into red despite tax review

Textile, engineering, pharma sectors dominate turnover board


Babul Barman | Saturday, 6 July 2019


Stocks slipped back into the red in the outgoing week that ended on Thursday as tax review measures failed to jack investors' confidence up.

Although the government brought some changes to the budgetary measures for the capital market, they failed to make any positive impact on the market.

The parliament passed the budget for fiscal year 2019-20, bringing down the tax rate on retained earnings and reserves of listed companies to 10 per cent from the proposed 15 per cent.

The government also relaxed some conditions for holding onto retained earnings -- a company has been allowed to keep 70 per cent of its profits in a year as retained earnings.

Market analysts said the changes in the budget drew mixed reactions from the investors who think that tax might force some companies to declare cash dividend but the tax might be a burden for some sectors, including the banking and financial institutions.

A leading broker said the latest gas price hike made a negative impact on the manufacturing companies' shares as the price hike is likely to dent their profits.

The outgoing week saw four trading days as the market remained closed on Monday due to Bank Holiday. Of them, the first three sessions drifted lower while the last one edged higher.

Week-on-week, DSEX, the prime index of the Dhaka Stock Exchange (DSE), went down by 49.26 points or 0.91 per cent to settle the week at 5,380.

Two other indices also finished last week. The DS30 index, comprising blue chips, fell 14.83 points to finish at 1,910 and the DSE Shariah Index lost 12.43 points to close at 1,233.

According to International Leasing Securities, most of the investors followed cautious stance after budget approval and the latest gas price hike made them more cautious.

The investors were closely observing the current macro-economic environment of the country about the impact of 32.8 per cent hike in gas price on the manufacturing companies' profitability, commented International Leasing Securities.

The total turnover on the prime bourse stood at Tk 19.47 billion, down from Tk 21.18 billion in the week before as last week saw four trading days instead of five.

The daily turnover averaged out at Tk 4.86 billion, registering an increase of 15 per cent over the previous week's average of Tk 4.23 billion.

The textile sector continued to dominate the turnover board, capturing 17 per cent of the week's total turnover, followed by engineering with 15 per cent and pharmaceuticals 12 per cent.

The market capitalisation of the DSE also fell 0.72 per cent to Tk 3,975 billion on Thursday from Tk 4,004 billion in the week before.

The port city bourse, Chittagong Stock Exchange (CSE), also ended lower, with its CSE All Share Price Index - CASPI -shedding 173 points to settle at 16,469 points and the Selective Categories Index - CSCX - losing 102 points to finish at 9,984.

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