Investors not happy with 'market-friendly' budget

Proposal of 15pc tax on reserve casts negative impact

FE Report | Published: June 17, 2019 10:07:42 | Updated: June 18, 2019 10:27:27

File Photo (Collected)

Stocks slumped Sunday, the first session after unveiling the national budget, as some proposals of the budget made investors upsets.

DSEX, the prime index of the Dhaka Stock Exchange (DSE), settled at 5,430, losing 43.47 points or 0.79 per cent over the previous session.

Finance Minister AHM Mustafa Kamal unveiled the national budget for the fiscal year (FY) 2019-20 on Thursday last.

The finance minister proposed, among other measures, imposition of 15 per cent additional tax on retained earnings or reserves, only if the amount exceeds 50 per cent of the paid-up capital of the company.

The budget 2019-20 also proposed imposing 15 per cent tax on stock dividend to promote cash dividend as part of efforts to increase money flow into the stock market.

The government announced the measure to ensure proper distribution of profits among the investors.

Market analysts said the good companies might face difficulties with the proposed 15 per cent tax on stock dividend.

Dr. AB Mirza Azizul Islam, former adviser to the caretaker government, said the good companies may face problems in case of expansion, if 15 per cent tax is imposed on the stock dividend.

He also said the proposal of imposing 15 per cent tax on retained earnings and reserves may be a cause of concern for good companies as they retain profits for future investments.

However, he welcomed the tax-free dividend income measure that will benefit the capital market.

The Dhaka Stock Exchange authorities also expressed divided opinion on imposition of 15 per cent additional tax on retained earnings or reserves at a post-budget press briefing on Sunday.

A leading broker said many investors are still analysing the proposed budget to invest in good stocks.

The market opened on positive note and the key index rose 19 points within 25 minutes of trading. But rest of the session went down steadily.

Two other indices also ended lower. The DS30 index, comprising blue chips, fell 13.64 points to finish at 1,905 and the DSE Shariah Index shed 8.65 points to close at 1,235.

Turnover, another important indicator of the market, stood at Tk 5.34 billion, which was 6.64 per cent lower than the previous session's turnover of Tk 5.72 billion.

A total number of 154,664 trades were executed in the day's trading session with trading volume of 151.32 million securities.

The market capitalisation of the DSE also fell to Tk 4,003 billion on Sunday, from Tk 4,021 billion in the previous session.

According to EBL Securities, the investors adopted cautious stance following lack of confidence shown by investors' expectation that failed to meet the national budget declaration.

The large cap sectors showed negative performance except power and food which gained 0.31 per cent and 0.16 per cent respectively.


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