Budgetary hopes drive DSEX higher

The benchmark equity index extended its gains for a second straight session on Sunday, as investors showed renewed interest in selective stocks, buoyed by optimism over potential incentives in the national budget for fiscal year 2025-26.

Market analysts said investors were encouraged by expectations that the interim government is set to unveil policy supports aimed at revitalising the struggling capital market. These include tax incentives for stockbrokers and merchant banks.

Finance Adviser Dr Salehuddin Ahmed will present the national budget today (Monday), which may include market-supportive measures such as widening the tax rate gap between listed and non-listed companies, a long-standing demand of the market stakeholders.

Due to the budgetary expectations, the market remained largely upbeat throughout the session as the buyers dominated the market, pushing prices higher and supporting a broader recovery across several sectors.

Finally, the benchmark DSEX index of the Dhaka Stock Exchange (DSE) ended the session 30 points or 0.65 per cent higher at 4,668. The DSEX recovered more than 52 points in the past two consecutive sessions.

Finance Ministry officials have confirmed that the corporate tax gap between listed and non-listed companies may be increased from the current 5 percentage points to 7.5 percentage points in the budget, in a bid to encourage new listings.

At present, listed companies excluding banks, insurers, financial institutions, mobile operators, and tobacco firms, enjoy a 20 per cent corporate tax rate. However, due to strict compliance requirements, many of these companies fail to meet the conditions and end up paying a higher rate of 22.5 per cent.

Similarly, although the corporate tax rate for non-listed companies is 25 percent, they often have to pay 27.5 per cent tax due to their failure to meet requirements.

Currently, both listed and non-listed firms are required to process all income and expenditure transactions exceeding Tk 0.5 million in single transactions and Tk 3.6 million annually through banking channels.

The upcoming budget is expected to relax these conditions for listed companies. If listed companies can channel all their income only through banking channels, they will qualify for a 20 per cent corporate tax rate, while the conditions for non-listed firms will remain unchanged.

According to a Finance Ministry official, the corporate tax rate for non-listed companies will be set at 27.5 per cent, with no option for conditional reductions for the fiscal years 2026 and 2027.

The interim government is preparing to introduce policy supports and tax incentives aimed at encouraging well-performing companies to go public, said a merchant banker.

To encourage trading and investment in the stock market, the rate of advance income tax (AIT) on stock market turnover is expected to be reduced to 0.03 per cent from the current 0.05 per cent.

"The reduction of advance income tax will help many stock brokerage firms to survive, as they are incurring losses," said Saiful Islam, president of the DSE Brokers Association.

In addition, a significant cut in the corporate tax rate for merchant banks is being considered, potentially lowering it to 27.5 per cent from the existing 37.5 per cent.

"We firmly believe that these proposals of incentives will significantly contribute to the development and growth of the capital market," Mr Islam said.

He also noted that narrowing the corporate tax gap between listed and non-listed companies would encourage high-performing firms to list on the stock exchange.

SUNDAY'S MARKET PERFORMANCE

During the trading session, the blue-chip DS30 index, a group of 30 prominent companies, also gained almost 18 points to close at 1,747 while the DSES index, which represents Shariah-based companies, rose 6 points to 1,017.

The investors' buying interest on certain large-cap stocks coupled with easing pre-Eid sale pressure added strength to the market's recovery, said a stockbroker.

EBL Securities, in its regular market analysis, said the market witnessed buying interest in certain blue-chip and low-paid up stocks since the beginning of the trading session.

"Buyers continued to possess the helm of market momentum till the end of the session, leading the benchmark index to witness some recovery following a prolonged losing streak," said the stockbroker.

Price surge of selective stocks, such as Walton, BRAC Bank, Square Pharmaceuticals, BAT Bangladesh, Islami Bank and Grameenphone pulled the market index up as they jointly accounted for a 18-point rise in the key index.

The investor sentiment continued to be buoyed by bargain hunting, although trading activities remained sluggish, said the stockbroker.

Turnover, a crucial indicator of the market, stood at Tk 2.35 billion, which was 5 per cent lower over the previous day's turnover of Tk 2.47 billion.

Investors were mostly active in the banking sector, which accounted for 22 per cent of the day's total turnover, followed by the food sector (14 per cent) and textile sector (11 per cent).

The major sectors showed positive performance. Engineering sector booked the highest gain of 1.8 per cent, followed by food, banking, power and pharma.

Bangladesh Shipping Corporation was the most-traded stock with shares worth Tk 103 million changing hands, followed by KDS Accessories, Lovello Ice-Cream, Orion Infusion and BRAC Bank.

The Chittagong Stock Exchange (CSE) also ended higher, with CSE All Share Price Index (CASPI) gaining 65 points to 13,116 while its Selective Categories Index (CSCX) rose 50 points to 8,014.

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