Stocks extend losses amid cautious trading

Stocks extended their losses for a fourth straight week, but marginally, as investors were mostly watchful throughout the week ahead of the national budget placed in parliament on Thursday.

DSEX, the key index of Dhaka Stock Exchange (DSE), shed only 14.64 points or 0.28 per cent to settle the week at 5,237. The benchmark index lost a total of 425 points in the past four weeks.

As the stock market was passing through a critical time due to lingering macroeconomic challenges, the investors hoped for something positive from the budget for FY25.

Placing a record Tk 7.97 trillion national budget on Thursday, Finance Minister Abul Hassan Mahmood Ali proposed a capital gain tax for individual investors whose capital gains have exceeded Tk 5 million.

The budget also allowed undisclosed money into securities, apartments, land, and narrowed the tax gap between listed and non-listed companies.

The finance minister proposed the corporate tax rate for publicly traded companies remain unchanged while tax rate for not-listed companies reduce 2.5 per cent to 25 per cent with condition, narrowing the gap between listed and non-listed companies to 5 per cent.

The stock market operators and experts have expressed mixed reaction to the tax measures announced for the stock market in the proposed budget for FY25.

Hailing the proposed budgetary measures, some of them said investors would benefit from the measures while others said good companies will be discouraged from going public.

The government may get an insignificant amount from capital gain tax from individual investors, but the psychological impact on the overall market is high, said Mir Ariful Islam, managing director of Sandhani Asset Management.

The finance minister did not cut existing facilities or corporate tax rates for publicly-traded companies, which is a good news for the market, said Md Sajedul Islam, managing director of Shyamol Equity Management.

However, he said, the tax gap for listed and non-listed companies should have been widened to encourage new companies to go public.

Mr Islam said undisclosed money would mostly go to less-risky areas of investment, real estate for example, rather than the volatile equity market.

Saiful Islam, president of Dhaka Brokers Association of Bangladesh, however, appreciated the whitening of black money in stocks, saying it will help increase liquidity flow into the market.

"Imposition of capital gain tax may limit the interest of high net worth individuals to invest in the capital market,' commented EBL Securities, in its budget analysis.

"Money supply in the economy will be positively impacted by the opportunity to legalise undisclosed money by paying a fixed tax rate," said the EBL.

The listed drug makers, IT and textile companies will get benefit as the budget proposed reduction of customs duty while food, high-powered bikes makers may face increased production costs due to rising import duty hikes.

Limiting tax benefits to government-run Hi-Tech Parks would impact Walton Hi-Tech Industries' financial performance, as the company operates under the approved status of a private Hi-Tech Park.

Cost of building and maintaining power plant will go up as the custom duty for importing plant, equipment and erection materials by power companies has been raised to 5 per cent from 0 per cent, according to EBL analysis.

Besides, rise in the supplementary duty on ice cream could lead to upward adjustments in product pricing, which may reduce sales revenue of ice-cream producers, it added.

The cost of sales for the telecom operators will increase, which is likely to affect their bottom line as the budget increase supplementary duty (SD) on the SIM/RUIM card enabled mobile telecom service from the existing 15 per cent to 20 per cent while VAT on SIM/e SIM from the existing Tk 200 to Tk 300.

"The investors are now analyzing the budget and we are waiting to see how the market reacts on Sunday," said a leading stockbroker.

This week, the total turnover of the DSE reached Tk 22.58 billion, up from previous week's Tk 19.51 billion.

Accordingly, the average daily turnover stood at Tk 4.51 billion, which was 16 per cent higher than the previous week's tally of Tk 3.90 billion.

The blue-chip DS30 index, a group of 30 prominent companies, lost almost 17 points to 1,858 while the DSES index, which represents Shariah-based companies, fell 7 points to 1,136.

Three sectors -- pharmaceuticals, food and textile -- accounted for almost 45 per cent of weekly turnover.

Meghna Petroleum became the most-traded stocks with shares worth Tk 990 million changing hands, followed by BAT Bangladesh, Lovello Ice-Cream, Beach Hatchery and Rupali Life Insurance.

The Chittagong Stock Exchange also ended lower, with its All Shares Price Index (CASPI) shedding 126 points to 14,946.

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