A market devoid of instinct

The capital market is viewed as an integral part of any economy. Any major/significant development taking place in any other segment of the economy leaves an impact on the capital market and it is reflected in stock prices. In the case of a large stock market, international developments--- economic and political--- also influence stock prices.

Bangladesh stock market is the only exception, it seems. It is hard to predict its movement. Any significant domestic or international development does not have any bearing on its behaviour. It rather goes in a direction different from the obvious ones.

Take, for instance, the ongoing reaction to the government's decision to hike the fuel oil prices by 23 per cent at one go. Economists, businesses and other social groups have been highly critical of the move, as they feel the fuel price hike would affect the country's economic recovery process and deal a severe blow to poor and low-income people. The price situation is already under pressure and the fuel price hike would only exacerbate it.

The normal reaction of the market to such a development would have been a negative one. But the bourses here have gone in the opposite direction. For the past couple of weeks, the stock prices recorded a continuous fall, as the main index DSEX of the Dhaka Stock Exchange (DSE) declined by over 560 points.

But amidst vehement protests from different quarters over the hike in diesel and kerosene prices, the market recorded a sharp rise on Wednesday last. So-called market analysts found 'high expectations' among the investors behind the investors' rush for renewed investments in stock. But they did not explain the reasons behind the expectations going up. Merchant bankers have their ways of explaining the market behaviour from time to time. But the explanations in most cases do not match with the ground realities.

The profitability of listed issues matters most for investors' appetite for investment. Companies make a profit in a favourable economic/ business environment. The latest hike in fuel oil prices would push up the cost of production because of the consequent rise in the prices of most goods and services. Besides, the demand for goods and services goes down in an economy where the cost of living faces an unabated rise.

The Bangladesh stock market lacks the instinct to react to a development that has a bearing on the economy. A mature market does show that ability. Going by its rise and fall, one has ample reasons to believe that the market here does not have the inner strength to move forward on its own. Someone or certain quarters often guides it remotely.

That should not have been the case. The number of good shares listed with the bourses is not very insignificant. These companies offer attractive dividends at the end of the year. Besides, the prospect of making a capital gain is also there. However, the problem has not been with the quality of listed stocks. What has been hurting the market here is the occasional outside intervention with a design to push up stock prices artificially aimed at serving an unholy purpose. The market needs to be allowed to operate on its own with all its strengths and weaknesses.

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