Blue chips drive DSEX to one-year high on falling T-bond yields

The benchmark index of the Dhaka Stock Exchange (DSE) crossed the 5,600 mark on Tuesday for the first time in nearly a year, as a buying spree strengthened the equity market despite ongoing political concerns.

Analysts said well-performing blue-chip stocks remained the main focus of investors, driven by attractive valuations. Investor sentiment also stayed resilient, supported by positive macroeconomic developments and declining interest rates on government securities.

Currently, the country's overall stock market price-to-earnings (P/E) ratio is around 10, indicating that the market remains attractive for investment.

Moreover, the yield rates on government securities continued to fall in the three months to August, signalling potential easing of interest rates in the money market.

Government Treasury bond yields dropped between 200 and 250 basis points during this period, mainly due to lower government borrowing demand.

There is an inverse relationship between government securities' yield rates and the equity market. "When the interest rate falls, the equity market gets a boost," said Akramul Alam, head of research at Royal Capital.

Bangladesh's capital market is now on the verge of a potential bull run, backed by improving macroeconomic indicators and rising investor confidence, said Mohammad Rehan Kabir, head of research at EBL Securities, in a statement.

Mr. Kabir compared Bangladesh's situation with regional peers. "The capital market of Bangladesh is well positioned to mirror the trends experienced in Pakistan and Sri Lanka, where easing inflation and declining Treasury yields triggered strong market rallies."

Opportunistic investors have capitalised on the rallies by reshuffling portfolios toward potential quick-gain opportunities.

Investor interest in certain June-closing stocks ahead of their corporate declarations also contributed to the upbeat market mood.

Price hikes of selective blue-chip stocks such as City Bank, Pubali Bank, Grameenphone, Prime Bank, Beacon Pharma and Robi Axiata largely contributed to the index gain, jointly accounting for nearly 10 points of the DSEX rise on Tuesday.

The DSEX, the prime index of the DSE, gained 37 points or 0.66 per cent to settle at 5,621, its highest level since September last year.

Since the political changeover in August last year, the index has added 392 points or 7.5 per cent, while the Dhaka bourse's market capitalisation has surged by Tk 832 billion.

The recovery has been aided by investor optimism stemming from macroeconomic stability and greater clarity on the political front ahead of the upcoming national elections, according to EBL Securities.

"Investors continue chasing equity positions owing to sustained confidence across the trading floor," said the stockbroker.

The stock index sustained its bullish momentum, supported by strong investor interest in large-cap stocks, particularly well-performing blue chips, following the political regime change.

BRAC Bank, considered one of the best-performing blue-chip stocks with a strong reputation, has more than doubled in value since the political changeover.

On Tuesday, its share price surged 113 per cent to Tk 77.2 each on the prime bourse, making it the highest contributor to the yearly index gain, amid heightened optimism among investors.

BRAC Bank reported a record consolidated net profit of Tk 14.32 billion in 2024, representing a 73 per cent year-on-year growth, driven by substantial income from investments in government securities.

Islami Bank stock also rebounded, lifting off the floor on August 6 last year after 15 months and soaring 33 per cent over the year as investors rushed to buy shares following an ownership change.

The blue-chip DS30 index, comprising 30 prominent companies, added 6 points to close at 2,295, while the DSES index, representing Shariah-based companies, rose 8 points to 1,233 on Tuesday.

Market participation remained strong, with turnover crossing the Tk 12 billion mark once again, reaching Tk 12.78 billion on Tuesday-an increase of more than 8 per cent from the previous day.

The telecommunication sector booked the highest gain of 1.27 per cent as Grameenphone and Robi shares rose 1.07 per cent and 2.1 per cent respectively, following the launch of 5G services across all divisional cities on Monday.

However, shares of some poorly performing companies also surged, raising concerns of possible market manipulation. These stocks of non-performing companies are significantly outperforming industry peers that have continued regular business operations, posting profits and paying dividends.

Gainers strongly outnumbered losers, as out of 398 issues traded, 220 advanced, 131 declined, and 47 remained unchanged on the DSE.

City Bank was the most-traded stock, with shares worth Tk 457 million changing hands, followed by Lovello Ice-cream, Khan Brothers, Orion Infusions and IT Consultants.

The Chittagong Stock Exchange (CSE) also ended higher, with its All Shares Price Index (CASPI) rising 46 points to 15,623 and the Selective Categories Index (CSCX) gaining 26 points to 9,618.

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