Stocks extend gaining streak amid policy rate hike

Equity benchmark index extended the winning streak for a second day on Tuesday, with turnover crossing Tk 7.0 billion-mark, driven by price appreciation in particular large-cap issues.

Market experts said that stocks managed to stay positive riding on investors' interest in specific large-cap shares although overall market sentiment remained subdued.

The market began with a positive note and the benchmark index of the Dhaka Stock Exchange (DSE) soared 65 points to 5,825 within the first ten minutes of trading.

However, subsequent sell pressure eroded most of the early gains as investor sentiment was affected by potential interest rate hikes after the central bank raised policy rate further amid ongoing reforms in the financial sector.

The latest policy rate hike by a further 50 basis points amid a tightened monetary space fuelled the prevailing concerns among stock investors, market experts said.

The rising interest rates have already made fixed-income instruments more lucrative as compared to stock market return while further possible interest rate hikes exacerbated the market situation.

The Bangladesh Bank (BB) on Tuesday raised the policy rate hike by further 50 basis points to 9.5 per cent suiting interim government's move to contain inflation-fuelled price rises for a long time.

DSEX, the prime index of the Dhaka Stock Exchange, finally settled at 5,778, with a gain of more than 17 points or 0.30 per cent. The DSEX added 43 points in the past two trading days.

Price hike of selective blue chip stocks such as Islami Bank, Beacon Pharma, Grameenphone, Olympic Industries and BAT Bangladesh contributed largely to Tuesday's market rise as they jointly accounted for 45 points index rise.

Islami Bank's share soared 9 per cent on Tuesday, contributing 25.4-point index gain alone. Islami Bank's stock price almost doubled to Tk 64 on Tuesday.

Islami Bank stock price started to rise since the fall of AL-led government on August 5, making it the most-valued bank stock now.

Beacon Pharma stock also surged 8.3 per cent, contributing to a 7.2 points rise of the key index, followed by GP, the largest stock in terms of market-cap, which accounted for 4-point rise.

Subsequently, the blue chip index DS30, a group of 30 prominent companies, gained 12 points to 2,109.

The government's latest policy rate hike may reduce the fund flow to the stock market for a short-term, said a stockbroker.

However, he said, the lending rate may rise initially, the market-based rate is necessary to reduce inflationary pressure and restore macrocosmic stability.

"If the country's macrocosmic stability returns, the stock market will also be benefited in the long-term," he added.

The market turnover, a crucial market indicator, stood at Tk 7.18 billion, which was 6.5 per cent higher than the previous day's turnover of Tk 6.74 billion.

Investors were mostly active in the banking sector, which accounted for 21.4 percent turnover, followed by pharma (18.9 per cent) and telecom (10.2 per cent).

Large-cap sectors posted mixed performance. Telecommunication booked the highest gain of 1.54 per cent, followed by food with 1.03 per cent, banking 0.09 per cent, and 0.07 per cent.

On the other hand, non-bank financial institutions, engineering and power lost 1.5 per cent, 1.06 per cent and 1.03 per cent respectively.

The losers, however, took a strong lead over the gainers, as out of 395 issues traded, 262 declined, 93 advanced and 40 issues remained unchanged.

GP became the most-traded, with shares worth Tk 599 million changing hands, closely followed by Brac Bank, Linde Bangladesh, IBN Sina, and Islami Bank.

Grameen One: Scheme Two was the top gainer with a rise of 9.77 per cent, while Khan Brothers was the top loser, shedding 9.95 per cent.

The Chittagong Stock Exchange (CSE), however, edged lower with its All Share Price Index (CASPI) losing 11 points to settle at 16,176 while the Selective Categories Index (CSCX) shed 2 points to 9,771.

The port city bourse traded 4.18 million shares and mutual fund units with a turnover volume of Tk 120 million.

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