Stocks tumble shrugging off strong earnings

The benchmark index of the Dhaka Stock Exchange (DSE) plummeted to a two-week low on Monday as investor pessimism deepened amid lingering political uncertainties surrounding the forthcoming national election.

Well-performing blue-chip stocks, including Square Pharma, BRAC Bank, Robi Axiata, Unilever Consumer Care, and LafargeHolcim, saw their prices fall between 2 per cent and 5 per cent over the past two weeks.

The downturn came despite their impressive earnings growth in recent financial disclosures, as cautious investors sold off their holdings amid heightened political uncertainty.

Investor sentiment has remained subdued for an extended period due to concerns about the market outlook amid ongoing economic and political tensions.

Following the fall of the previous government, stock investors had anticipated that companies with solid fundamentals would gain amid renewed hope for economic stability and improved governance.

However, investors' enthusiasm gradually faded amid looming political uncertainty, vulnerabilities in the banking sector, and sluggish private-sector investment.

As a result of the prolonged downtrend, even fundamentally strong stocks have failed to attract investors - a pattern that continues to plague the market.

Many investors and market operators have also expressed dissatisfaction with the performance of the stock market regulator formed after the political changeover.

Market analysts said persistent political uncertainty, instability in the financial sector, and panic-driven rumors in the capital market - centering on new margin and public issue rules aimed at strengthening market discipline - have eroded investor confidence.

Md. Sajedul Islam, managing director of Shyamol Equity Management, said concerns over a potential slowdown in business activity ahead of the anticipated political transition might have weighed on investor sentiment.

Some investors also reshuffled their portfolios following a flurry of corporate earnings and dividend declarations last week, said Mr. Islam.

"As major companies have already released their quarterly and annual financial results, prudent investors are rebalancing their portfolios based on the earnings results," said Mr. Islam.

Broad-based sell-offs emerged from the early hours of trading on Monday as investors adopted a defensive stance, dragging the benchmark index to a two-week low.

The DSEX, the prime index of the Dhaka Stock Exchange, slid 55 points, or 1.07 per cent, to settle at 5,061 - the lowest level in more than two weeks since October 19.

The stock index struggled to sustain its recovery momentum as investors engaged in stock-wise portfolio reallocation based on the latest earnings, EBL Securities said.

Despite impressive earnings disclosures from several blue-chip companies, BRAC Bank, Islami Bank, Square Pharma, Olympic Industries, and City Bank saw price erosion, dragging the prime index down. The price fall of these five stocks jointly accounted for a 13-point drop in the index on Monday.

BRAC Bank posted its highest-ever quarterly profit of Tk 6.30 billion in the July-September quarter. Despite the record earnings, the bank's stock plunged 1.9 per cent on Monday, contributing to a 5.10-point fall in the key index alone.

Square Pharma, another blue-chip stock, reported a 15 per cent year-on-year profit growth in FY25. Yet, its stock dropped 0.60 per cent, accounting for more than a 2-point fall in the index.

Consequently, the blue-chip DS30 index - a group of 30 prominent companies - lost 22 points to close at 1,961, while the DSES index, which represents Shariah-based companies, shed 12 points to end at 1,066.

Market liquidity continued to remain subdued, with total turnover dropping 5 per cent to Tk 5.18 billion on Monday from the previous session.

Investors were mostly active in the pharmaceuticals sector, which accounted for 13 per cent of the day's total turnover, followed by the engineering and textile sectors.

Losers outnumbered gainers, as out of 398 issues traded, 300 saw price corrections, 45 advanced, and 53 remained unchanged on the DSE floor.

Most major sectors closed in the red. The non-bank financial institutions sector suffered the biggest loss of 2 per cent, followed by engineering, telecom, power, and banking sectors.

Low-cap stocks dominated the turnover chart, with Summit Alliance Port topping the list, closely followed by Anwar Galvanizing, Orion Infusion, and Simtex Industries.

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