Dhaka stocks plummeted on Monday after a six-day rise amid media reports that Bangladesh Bank fined seven banks and would penalise a number of other banks for crossing their capital market exposure limit.
DSEX, the key index of Dhaka Stock Exchange, plunged by 1.23 per cent, or 76.60 points, to finish at 6,128.89 points after gaining 126 points in the previous six sessions.
The market declined steeply on the day as investors, both institutional and general, went for selling shares heavily as they became jittery over the central bank’s move to punish the errant banks.
According to the media reports, the central bank fined seven banks on October 5 for their investment in stocks beyond the allowable limit while a number of other banks would also be punished by the BB for the same offence.
According to the Banking Company Act 2013, banks are allowed to invest 25 per cent of their capital in stocks.
As a result of the BB move, some of the banks which have overexposure might have gone for selling stocks on Monday, making general investors panicky, said stockbrokers.
Bank shares led the nosedive on Monday, declining significantly by 3.2 per cent with holding 48 per cent of the day’s turnover.
Out of the 30 traded banks, 27 declined, just one advanced and two remained unchanged while out of the 23 traded NBFIs, 17 declined, three advanced and three remained unchanged.
Analysts said that the central bank was required to strengthen its monitoring over the bank’s exposure long before when banks’ share prices started to hike abnormally and the banks headed towards the upper limit of their capital market exposures.
The prices of bank shares began rallying in June and since then banks’ share prices increased by 42.68 per cent till Sunday.
But on September 11, the central bank felt the need for intensifying its monitoring and supervision on banks’ investment in the capital market and revised the reporting formats that the banks have to submit their reports on weekly basis with mentioning daily transactions separately, analysts said.
Many investors invested at the capital market as the market remained bullish riding on the surge of bank shares and when the bank shares forced to retreat, investors became jittery and prudent, stockbrokers said.
They said that many of the investors went for selling on Monday fearing further fall in the index.
As a result, food, non-bank financial institutions and pharmaceuticals joined with the banks and slumped by 3.1 per cent, 0.8 per cent and 0.1 per cent respectively.
Of the 332 companies and mutual funds traded, 181 declined, 117 advanced, and 36 remained unchanged.
Turnover at the bourse declined slightly to Tk 967.84 crore from that of Tk 1,054.24 crore in the previous trading session.
‘The corporate declaration from several companies in recent period could not attract investors that resulted in daylong sell-offs,’ said EBL Securities in its market commentary.
‘The index remained negative throughout the day as investors continued their selling pressure on stocks from bank, food and allied and financial institutions sectors,’ it said.
DS30, the blue-chip index of the DSE, dipped by 0.69 per cent, or 15.48 points, to close at 2,199.66 points.
Shariah index DSES declined by 0.39 per cent, or 5.39 points, to finish at 1,349.25 points.
LankaBangla Finance led the turnover chart on the day with its shares worth Tk 59.84 crore changing hands.
Uttara Bank, Islami Bank, IFIC Bank, EXIM Bank, National Bank, Aamra Network, Mercantile Bank, City Bank and Premier Bank were the other turnover leaders.
Stylecraft gained the most, adding 6.24 per cent, while Simtex Industries was the worst loser on the day, shedding 7.93 per cent.
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