Tk 100b wiped out from market cap

Stocks experienced a major setback this week, as jittery investors rushed to dump their holdings to prevent further erosion of their portfolios, prompted by abrupt regulatory measures as part of its ongoing reform initiatives.

Panic set in among the investors after the stock exchange downgraded 28 low-profile companies to 'Z' category for non-compliance with the securities laws and the stock market regulator ordered a probe into unusual price movement of Islami Bank stocks.

Risk-averse investors reacted negatively to the decisions, leading to heavy sell-offs -- especially in the last session of the week.

Moreover, investor sentiment was influenced by potential interest rate hikes following the Bangladesh Bank's decision to raise the policy rate amid ongoing reforms in the financial sector.

The latest policy rate hike of 50 basis points, amid a tightened monetary space, has intensified concerns among stock investors, market experts said.

On Tuesday, the central bank raised the policy rate hike by further 50 basis points to 9.5 per cent in a bid to contain inflation-fuelled price rises.

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

All such developments have put the investors under pressure. As a result, the market closed in the red in three sessions of the week while two others managed to end marginally higher.

The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), finally settled the week 96 points or 1.68 per cent lower at 5,639, after gaining nearly 9 points in the week before.

This week, Tk 100 billion was wiped from the market capitalisation of the DSE, reducing it to Tk 6,856 billion. The market-cap is calculated by multiplying the total number of a company's outstanding shares by the current market price.

The DSES index, which represents Shariah-based companies, managed to stay positive by gaining 4 points to close at 1,262, riding on Islami Bank, which gained 30.4 per cent, becoming the week's top gainer.

Islami Bank alone accounted for more than 62-point rise in the key index, while some other banks such as Social Islami Bank, First Security Islami Bank, Dhaka Bank, Exim Bank and AB Bank saw price appreciation.

Although selective bank stocks saw price appreciation, the overall market remained down as 88 per cent traded shares saw price erosion.

The blue-chip DS30 index, a group of 30 prominent companies, also lost 42 points to 2,065.

Stocks plunged as investors adversely reacted to the regulatory decision of reclassifying 28 stocks into the Z category and decided to trim their equity exposure amid uncertain market momentum, according to EBL Securities.

Md. Ashequr Rahman, managing director of Midway Securities, said that a company's shift to 'Z' category leaves its shareholders in a precarious position.

Investors who bought shares using margin loans must pay off their loans, as 'Z' category stocks are not considered marginable securities. Consequently, they may be forced to sell their securities if they cannot repay the margin loans.

"This is why the degradation of a large number of companies significantly impacted the index on Thursday," Mr Rahman said.

The market turnover, a crucial market indicator, however, reached Tk 33.96 billion this week, as against Tk 24.52 billion in the week before, as this week saw five trading days instead of previous week's four sessions.

Accordingly, the average daily turnover stood at Tk 6.79 billion, which was 11 per cent higher than the previous week's average of Tk 6.13 billion.

Investors were mostly active in the banking sector, which accounted for 27 per cent of total weekly turnover, followed by pharma (15 per cent) and textile (8 per cent).

All but the heavyweight banking sector saw sharp corrections this week. Among the major sectors, engineering witnessed the highest correction of 8.3 per cent, followed by non-bank financial institutions (7.8 per cent), power (4 per cent) and (1.7 per cent).

Only the banking sector posted 3.8 per cent gain riding on Islami Bank, which gained 30.4 per cent alone.

Prices of 88 per cent traded stocks saw price erosion this week, as out of 396 issues traded, 349 declined, 40 advanced and 7 issues remained unchanged.

BRAC Bank became the most-traded, with shares worth Tk 2.24 billion changing hands, closely followed by Grameenphone, Islami Bank, Sonali Aansh Industries and Social Islami Bank.

Islami Bank was the top gainer with a rise of 30.4 per cent, while New Line Clothings was the top loser, shedding 25.1 per cent.

The Chittagong Stock Exchange (CSE) also ended sharply lower with its All Share Price Index (CASPI) shedding 398 points to settle at 15,793 while the Selective Categories Index (CSCX) plunged 189 points to settle at 9,571.

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