Stocks recover lost ground in 2017 but questions remain

HM Murtuza | Published: 23:22, Dec 30,2017 | Updated: 23:36, Dec 30,2017

 
 

The surge of the country’s capital market key index, DSEX, by 23 per cent in the year 2017 helped investors to cheer a bit in terms of recovering the losses they had incurred during the market crash of 2010 and 2011 that was prolonged by more than two years.
Although the market surge was mainly dependent on the banking shares with an average 51 per cent increase, suspicion over the banks’ real financial health amid irregularities and growing number of default loans in the sector continued.
Besides, abnormal price hike of ‘Z’ category shares, widely known as junk category, manipulative share transaction and lack of enlistment of fundamentally strong companies has major concerns of the market, market operators and experts said.
For example, huge irregularities in loan disbursement led Farmers Bank toward liquidity crisis and failure to pay depositors money, and subsequent restructure of the bank’s board by Bangladesh Bank.
According to a latest data of Bangladesh Bank, overall defaulted industrial loans in the banks and non-bank financial institutions increased to Tk 80,307 crore at the end of September this year, increasing 30 per cent during last one year.
During the year, most of the newly listed companies’ shares increased abnormally with BBS Cables, aamra Networks, Fortune Shoe and Oimex Electrode remaining on the top of the list.
For instance, prices of Oimex, that issued each of its share at Tk 10, rose by more than 10 times in its debut trading at DSE without having any price sensitive information.
On the other hand, no-large capitalised entity or multinational company expressed their intention for enlistment with the bourses during the year, raising questions about the environment of the country’s capital market.
Mohammad A Hafiz, former president of Bangladesh Merchant Bankers Association, told New Age that the upward trend of the capital market during the year 2017 helped to recover the losses that the investors incurred during market crash in 2010-11.
Speaking about the banks’ prices movement during the year, Hafiz said the price increase of most of the banks was justified as they were trading at very low prices for a long time.
He, however, said the regulator should strengthen its monitoring of abnormal price movement of junk category and newly listed companies’ shares.
Asset & Investment Management Services of Bangladesh chief executive director Yawer Sayeed, however, raised question about the sustainability and justification of the surge as many bad elements were still in place.
He also said steps should be taken to contain the bad elements and for sustaining peoples’ interest that has grown during this period.
Speaking about the bank’s share price movement, Sayeed said although the banks share price increased significantly during the period, the condition of the sector is not good.
The prime index of the Dhaka Stock Exchange, DSEX, that replaced the previous DGEN after the market crash, has recovered 1,208.47 points during the year 2017 and sustained the positive vibe of the previous year when the index increased by 8.77 per cent or 406.41 points.
DSEX started the year with 5,036.05 points on January this year and ended the year with 6,244.52 points.
During the bullish run of the country’s capital market in 2010, the then-key index of DSE, DGEN, had increased to 8,918.51 points on December 5, 2010.
As the market overheated, DGEN declined by 613.93 points in last 18 trading sessions of the year, and 3,046.98 points and 1,038.29 points respectively in subsequent two years.
The market in the year 2013 and 2014 witnessed some gain of 47.24 points in 2013 and 598.41 points in 2014.
However, it fell by 235.32 points in 2015, leaving capital market investors in despair.
Speaking about the market surge of 2017, stockbrokers and experts said the stagnant investment situation, downward return from banks’ deposit products and lack of investments tools, among others, helped the capital market to keep afloat.
Meanwhile, last week of the year closed in positive note with DSEX
advancing 1.00 per cent, or 61.73 points, to close at 6,244.52 points on Thursday after losing 131.72 points in the previous four weeks.

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