Stocks dive deeper into the red as growing political tension weighs

The equity benchmark index dived deeper into the red this week after taking a breather last week to find its bottom, as investors remained jittery amid growing political uncertainty that severely impacted the investor sentiment.

In the absence of any strong catalyst, investors continued to offload their holdings to escape further losses, while the ongoing political unrest, pre-Eid sale pressure and the restrictions on payment of dividends by 18 listed banks added to the strain on the market.

As per Bangladesh Bank's strict regulation, the banks which have taken deferral facilities for meeting their provision shortfall will not be allowed to pay dividends for 2024 onwards.

Therefore, almost all banks experienced sharp price corrections, leading the banking sector to the worst weekly losers among the major sectors.

Although the regulator introduced several initiatives to strengthen governance in listed companies this week, the measures fell short of generating optimism surrounding the secondary market.

Consequently, the market plummeted in the first five trading sessions while the last one managed to close green, riding on the news that listed companies are going to get some tax incentives in the upcoming budget.

The government is planning to widen the existing 5 per cent corporate tax gap between listed and non-listed firms to 7.5 per cent in the next budget to encourage good companies to get listed on the struggling stock market.

The benchmark DSEX index of the Dhaka Stock Exchange (DSE) finally settled the week 147 points or 3.08 per cent lower at 4,638, after inching up only 4 points in the week before.

"The heightened political unrest and pre-budget uncertainties continued to dominate the trading floor with no respite for the unnerved investors as losses continue to mount on their already hampered portfolios," said EBL Securities in its weekly analysis.

However, bargain hunters emerged in the final session, showing renewed buying interests in particular blue-chip stocks that had traded at attractive valuations, said the stockbroker.

The factors such as high interest rates, declining corporate profitability, and legacy of negative equity, growing economic headwinds and political uncertainty weakened investor confidence, market analysts said

"Due to the continuous market decline, many margin accounts came under forced sale, which exacerbated the index plunge," said Md Sajedul Islam, managing director of Shyamol Equity Management.

Moreover, institutional investors are mostly in a hands-off position due to a liquidity crunch while small investors are not confident enough to inject fresh funds into the market, he added.

However, he noted that it is the high time to buy shares as many fundamentally strong shares came down to multi-year low.

The overall price-earnings (P/E) ratio of the DSE dropped below 9 per cent to 8.83 as of Thursday, indicating that most stocks are trading at a big discount.

Investors dumped the shares of bank, engineering, power and telecom sectors, exerting downward pressure on the indices.

Price fall of selective large-cap stocks, particularly bank stocks, such as BRAC Bank, City Bank, Al-Arafah Islami Bank, Pubali Bank, and Bank Asia, dragged the prime index down significantly. They jointly accounted for half of the key index fall.

The blue-chip index, a group of 30 prominent companies, lost 47 points to 1,730 while the DSES Index, which represents Shariah-based companies, shed 36 points to 1,011.

The total turnover remained low on the prime bourse as the total turnover stood at Tk 15.81 billion this week, down from Tk 17.22 billion the week before.

Consequently, the average daily turnover stood at Tk 2.63 billion, 8 per cent down from the previous week's figure of Tk 2.88 billion.

Investors were mostly active in the banking sector, which accounted for 18 per cent of the week's total turnover, followed by the food sector (11 per cent) and pharma sector (11 per cent).

More than 76 per cent traded shares witnessed price fall as out of 395 issued traded, 303 saw price erosion, 68 ended higher and 24 remained unchanged on the DSE trading floor.

Midland Bank was the most-traded stock with shares worth Tk 708 million changing hands, closely followed by Beach Hatchery, Shinepukur Ceramic, Fine Foods and BRAC Bank.

The port city bourse, Chittagong Stock Exchange, also ended lower, with its All Share Price Index (CASPI) losing 333 points to 13,052 while the Selective Categories Index (CSCX) shed 208 points to close at 7,965.

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