WEEKLY MARKET REVIEW: Stocks extend losses as investors await earnings

The benchmark equity index closed lower for a second consecutive week, as trading activity remained subdued with thin investor participation, reflecting growing caution ahead of the upcoming earnings season.

Market analysts noted that institutional and high-net-worth investors have largely adopted a 'go-slow' approach amid mixed expectations for earnings of companies with June year-end.

Most investors preferred to stay on the sidelines while some engaged in selective portfolio reshuffling ahead of earnings declarations, said Md Sajedul Islam, managing director of Shyamol Equity Management.

He added that institutional investors showed reluctance in deploying fresh funds into equities, while retail participants opted to hold on to cash, awaiting clearer signals from the corporate earnings front.

Jittery investors also chose to lock in gains from stocks that had rallied quickly in recent weeks, he noted.

However, prospects of a policy rate cut amid easing inflation and declining yield rates of the government securities are expected to drive market momentum ahead, he said.

The recent drop in yields of government securities -- particularly the 10-year bond, which dipped below 10 per cent for the first time in two years to 9.89 per cent from 10.26 per cent on Tuesday -- is fuelling speculation of a policy rate cut in the near term.

This week, the market saw two sessions close higher while three others ended sharply lower as investors turned cautious amid heightened volatility.

The DSEX, the benchmark index of Dhaka Stock Exchange (DSE), settled the week more than 74 points or 1.34 per cent lower at 5,450.

The DSEX lost a total of 164 points and the market-cap shed Tk 33 billion in the past two consecutive weeks.

The blue-chip DS30 index, a group of 30 prominent companies, also lost 44 points to close the week at 2,107 while the DSES index, which represents Shariah-based companies, fell 18 points to end at 1,178.

EBL Securities, in its weekly analysis, said stocks extended its correction phase for the second straight week as investors continued to adopt a broad-based profit-taking approach while shifting towards a defensive stance in the absence of any strong positive catalyst to revive sentiment.

Price fall of selective stocks, including some blue chips such as BRAC Bank, Beximco Pharma, Social Islami Bank, Robi Axiata and City Bank dragged the market index down. These five stocks accounted for 33-point fall in the weekly index.

There is also a cause for concern, as shares of some low-performing companies also continued to surge, signalling potential market manipulation.

Three junk stocks -- Shyampur Sugar Mills, Bangladesh Finance and Metro Spinning -- featured in the week's top 10 gainers' list, soaring between 10.9 per cent and 16.9 per cent during the week.

Investor caution continued to weigh heavily on the market, with total turnover falling sharply to Tk 35.05 billion this week, down from Tk 57.48 billion in the previous week.

Accordingly, the average daily turnover dropped sharply to Tk 7 billion, down 39 per cent from the previous week's average turnover of Tk 11.50 billion.

Investors were mostly active in the pharmaceuticals sector, which accounted for 13 per cent of the week's total turnover, followed by engineering (12 per cent) and banking sector (11 per cent).

Losers outnumbered the gainers this week, as out of 397 issues traded, 306 saw price correction while 68 others gained and 23 issues remained unchanged on the DSE floor.

Most of the major sectors showed negative performance. The non-bank financial institutions witnessed the highest loss of 6.5 per cent, followed by telecommunication (2.06 per cent), food (1.3 per cent), pharma (1.23 per cent), banking (0.96 per cent) and power (0.83 per cent).

Khan Brothers PP Woven Bag Industries became the most-traded stocks, with shares worth Tk 1.58 billion changing hands, closely followed by Summit Port Alliance, Robi, Asiatic Laboratories and Techno Drugs.

The Chittagong Stock Exchange also ended lower, with its All Shares Price Index (CASPI) shedding 181 points to close at 15,338, while the Selective Categories Index (CSCX) fell 109 points to 9,419.

The port city bourse traded 22.90 million shares and mutual fund units with turnover value of Tk 671 million.

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