Bangladesh faces steeper market losses than neighbours. Experts say it's not justified

The main market in Bangladesh witnessed rapid erosion of stocks than in Pakistan and India on Wednesday over fear of possible spill-over impacts of further escalation of the conflict between the two countries.

Investors in Bangladesh seem to have gone into a panic, having learnt that India struck nine sites in Pakistan in a retaliatory move for the April attack by gunmen on tourists on the Indian controlled side of the disputed Kashmir. So, as the Dhaka Stock Exchange (DSE) opened the trading session they went on a selling spree, dragging the broad index down 94 points in just 17 minutes.

There were then timid signs of recovery for a while but the market reverted to the depreciation mode, leading to a record single-day fall of 3.01 per cent in four years to 4802.41 points.

The last time when such a big fall of the index happened was on April 4, 2021. The DSEX lost 3.44 per cent on the day as investors dumped their holdings following the enforcement of countrywide lockdown to stem the spread of the coronavirus.

On Wednesday, the DSEX plunged to a four-year-and-nine-month low of 4802.41 points, with the loss of 149.31 points.

Several experts, while talking to the FE, said the sharp market decline was "not justified" by the factors, such as export and import to and from India and Pakistan that may get affected by the conflict. The war between Ukraine and Russia was a matter of concern in a real sense as it affected the global supply chain.

The index movements of the countries -- India and Pakistan -- that are on the verge of waging a full-blown war also prove the point.

Sensex, benchmark index of the Bombay Stock Exchange (BSE), on Wednesday jumped by 105.71 points or 0.13 per cent to close at 80,746.78 points. Nifty, the benchmark index of the National Stock Exchange (NSE) of India, also rose 34.80 points or 0.14 per cent to settle at 24,414 points.

However, the index of the Karachi Stock Exchange declined by 3.10 per cent to110, 047 points.

"The country-India-- that is itself at war has seen a positive closure of its stock market. So, the DSE's plunge is not justified," said S M Galibur Rahman, head of research and strategic planning at Shanta Securities.

He said the day's correction was driven by heavy selling pressure from retailers who feared that the tension between India and Pakistan might intensify.

The correction experienced by blue chip stocks played a pivotal role behind Wednesday's market fall because of their significant influence on the broad index.

Of the 30 blue chip stocks, 29 closed in the red, with only Prime Bank remaining unchanged at Tk 22 per share on the Dhaka bourse. The index DS30 witnessed more than 2 per cent correction to 1793 points. Grameenphone, Square Pharmaceuticals and Marico endured corrections up to 7.14 per cent on the day.

Of the stocks that traded on the DSE, only 9 advanced while 385 declined and the remaining five were unchanged. The premier bourse posted a turnover of Tk 5.16 billion.

Talking to the FE, a senior official of the Bangladesh Securities and Exchange Commission (BSEC) said, on condition of anonymity, that when a market is in decline sellers feel an urge to offload his stocks as early as possible.

On the other hand, if a buyer thinks he would get stocks at lower prices he takes time that ultimately creates an imbalanced situation, he added, referring to demand and supply of stocks.

For example, there were more than 700 sale orders for the stock of Walton Hi-Tech Industries at 2.15pm on Wednesday on the DSE. At that time, the number of buy orders for the same stock was above 400 only.

There are some groups of opportunist investors who allegedly play a role by taking positions at low prices, creating panic in the market. Moreover, netting offers them scope of selling stocks in the morning and making purchases with the proceeds before the closure of the market.

The official of the securities regulator has ruled out such possibility, especially for Wednesday, saying there were no significant buy positions from opportunist groups.

Among significant transactions at the retailers' level, he cited that four investors had purchased shares of Beach Hatchery worth Tk 150 million but the volume was not so high to drag the index.

"Collective actions [sale of shares in this case] of investors were behind the fall," the BSEC official said.

Meanwhile, some prudent investors took fresh positions in the market, getting stocks at their lowest level in years.

Chief Executive Officer of BRAC EPL Stock Brokerage Ahsanur Rahman said three of their foreign portfolio clients took fresh positions on Wednesday.

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