The Financial Express

Capital market passes best year since debacle

New listings in election year coupled with financial sector discipline to be major challenges next year

Babul Barman | Published: December 29, 2017 00:40:19 | Updated: January 01, 2018 10:51:47

Capital market passes  best year since debacle

Country's capital market witnessed a good year in 2017, showing signs of bouncing back from a sluggish trend that continued for more than six years since a debacle seven years ago.

The downside of the outgoing year was, however, less-than-required listings of new issues, which experts thought would be a must for maintaining the growth momentum in the years ahead, experts said.

"The market passed a mildly rising trend round the year and there was no severe fluctuation in the indices, which is good," AB Mirza Azizul Islam, former adviser to the caretaker government, told the FE. "But listing of new securities was not satisfactory."

The benchmark index of the Dhaka Stock Exchange (DSE) registered 24 per cent growth to more than 6,200 points in 2017, showing a sign that the market reached a state of overcoming the setback suffered for a long period of six years since the debacle in 2010-11.

It was the highest growth in terms of index, DSEX, since then. Another major indicator, the turnover, also hit seven-year high backed by active participation of the local and foreign investors.

The daily average turnover stood at Tk 8.75 billion, up 77 per cent year-on-year, which was the highest since 2010-11.

A consistent rally, almost throughout the year, enabled the DSEX to stay above the 6,200-point level and closed the trading of the year on Thursday at 6,244 points, up from 5,036 points on the first trading day of the year.

Trading at the market will remain close on the weekly holidays of Friday and Saturday while it will remain closed on Sunday next, the last day of the year, due to bank closing.   

The market remained afloat almost round the year, but got momentum since the middle of the year, when the benchmark index crossed the 'psychological' barrier of 6,000-point mark.

The DSEX hit record high at 6,336 points on November 26 last, following the market capitalisation hitting its all-time high of Tk 4,262 billion on November 23 last. The DSE market cap registered 24 per cent growth from the previous year.

Meanwhile, the CSE All Share Price Index (CAPSI) also showed more than 24 per cent growth year-on-year to finish the year at 19,268 points.

Mr Azizul Islam stressed the need for listing good companies, including state-owned ones, to maintain the positive momentum in the upcoming year.

"The government should come forward with an effective step to enlist state-owned enterprises to increase supply of good shares," said Mr Islam, also a former chairman of Bangladesh Securities & Exchange Commission.

Only six companies and one mutual fund floated primary shares and mobilised a capital worth Tk 2.19 billion only from the capital market in 2017. It was the lowest amount of capital mobilised through lowest number IPOs (Initial Public Offerings) in 2017 since 2009.

Khiarul Basher Abu Taher Mohammad, chief executive officer of MTB Capital, said the index movement was mostly driven by financial stocks, especially banking sector issues.

"The banking sector stocks were the market movers as the price of many bank stocks more than doubled during the year," he said.

He noted that a stable money-market, lower deposit rates and overall a stable economic situation contributed to accelerated market participation in the year.

The DSE market capitalisation to GDP (gross domestic product) ratio stood at 21.62 while the overall price earnings (P/E) ratio rose to 16.78 at the end of 2017.

Nine securities, including three mutual funds got listed with the DSE in 2017. With the inclusion of the new issues, the total number of listed securities stood at 569.

However, the funds raised by the listed companies through rights shares soared more than three-fold in 2017 compared to the previous year, as four listed firms netted around Tk 11.14 billion by issuing more than 868 million rights shares in 2017.

The foreign investors have higher exposure now than ever before, contributing to the overall high turnover. The data and trading patterns revealed that most of the participants in the market were in buying mood rather than selling.

The overseas investors bought shares worth Tk 65.76 billion and sold shares worth Tk 48.71 billion to take their net investment to Tk 17.05 billion in 2017, which was 27 per cent higher than that of the previous year.

Yawer Sayeed, managing director of AIMS of Bangladesh, said: "Political uncertainty over upcoming national election and probable impact on private investment coupled with lack of corporate governance in banking sector are the key challenges that capital market will face in 2018."

He said the share prices of many low-cap companies were still higher and many investors having good knowledge about the market stayed away from the capital market.

"The ongoing financial indiscipline in the banking sector still remains a big challenge," he noted.

"This current sentiment would only be sustainable if we can overcome the hindrance created due to the financial indiscipline and shortage of diversified products in our capital market," said Mr Sayeed.


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