Stocks in free fall as fear grips market

BSEC probes role of market intermediaries, companies’ unusual price movement

Staff Correspondent | Published: 00:00, Jul 22,2019


Dhaka stocks went into free fall on Sunday, hitting a 31-month low as the quarterly loss declared by Standard Bank shattered the already fragile confidence of investors, who have been grappling with the country’s financial sector woes including the People’s Leasing and Financial Services (PLFS) liquidation move.

Market operators said the bleak situation in the financial sector which had been reeling under the burden of huge defaulted loans was further exposed by the loss reported by Standard Bank in the second quarter.

The bank declared Tk 0.03 loss per share in the April-June period compared with that of Tk 0.03 in the same period of the previous year.

DSEX, the key index of Dhaka Stock Exchange, plummeted by 1.89 per cent, or 96.95 points, to close at 5,033.74 points on Sunday after losing 2.43 points in the previous session. Sunday’s plunge was the highest single-day loss in 17 months. It was the lowest since December 28, 2016 when the index was at 5,027.91 points.

DSEX lost 387.88 points in last 14 trading sessions that included three positive sessions. The recent plunge saw Tk 22,500 crore wiping off the market capitalisation.

Market operators said the market started plunging from the very beginning of Sunday’s session and finished it deep into the red zone as investors accelerated share sales following the Standard Bank’s declaration.

They said that the continuous plunge at the market diminished the investors’ risk-taking appetite.

Investors expected the government’s intervention in the market to prevent it from further fall but such intervention is not in sight, they said.

A section of affected investors on Thursday submitted a memorandum in the Prime Minister’s Office in Dhaka, seeking the prime minister Sheikh Hasina’s intervention in reviving the capital market. The prime minister went abroad on Friday and will be back next month.

Earlier, finance minister AHM Mustafa Kamal had pledged that the government would provide various incentives in the national budget for this fiscal year (2019-20) for the capital market that had pushed up the index for few days. But, investors found no incentives in the budget, rather penalty tax on listed companies that sapped the investors’ confidence.

Investors, who had previously anticipated that Kamal was market friendly and could understand the market pulse, now got irritated by his measures and illogical comments about the market.

Market operators said the recent fall stemmed from the government’s tax imposition on listed companies mentioning the move as incentive.

Kamal on July 18 said that the government was trying to put the country’s share market on a strong footing and could not understand why the country’s economic progress was not reflected in the stock market.

Former interim government adviser Mirza Azizul Islam told New Age on Sunday that the government highlighted the gross domestic product growth as the prime economic indicator and ignored the other indicators.

The investment and fund flow in the private sector were not in good shape and the government’s revenue collection missed the target in last couple of fiscal years, he said.

Besides, the GDP growth did not match with the other indicators that raised question about the growth, Mirza Aziz, also a former BSEC chairman, said.

He also said that investors found no incentives in the budget that disheartened them.

The messy banking sector with liquidity shortage and Grameenphone’s tussle with the Bangladesh Telecommunication and Regulatory Commission over an unpaid audit claim affected the market.

The recent PLFS’ liquidation move has intensified the investors’ tension and more non-bank financial institutions were in bad conditions.

Investors, who have been grappling with penalty tax and Grameenphone’s tussle with the BTRC, got panicked after the government moved to liquidate PLFS considering its fragile state.

The media reported that a number of financial institutions including PLFS were in Bangladesh Bank’s red category or in worse situation.

Share prices of many of them came down to record low in July.

The liquidation move exposed the sorry state of the country’s financial sector considering their bleak business status.

Investors feared that more financial companies might face liquidation, market operators said.

The average share prices of all the sectors except mutual funds plunged on the day.

Share prices of textile, NBFI, telecommunication and bank dropped by 4.09 per cent, 2.09 per cent, 1.56 per cent and 1.25 per cent respectively.

The Bangladesh Securities and Exchange Commission on Sunday formed a four-member inquiry committee headed by its director Rejaul Karim to investigate the role of market intermediaries for the current bearish

trend at the market, BSEC spokesperson and executive director Saifur Rahman said.

The committee will also look into the unusual price movement of listed securities, he said.

Share prices of mutual fund increased by 3.36 per cent on the day as market regulator BSEC in its new public issue rules barred the mutual funds from giving stock dividends.

Turnover on the bourse declined to Tk 368.64 crore on Sunday from Tk 395.29 crore in the previous session.

Out of the 353 scrips traded on the day, 273 declined, 61 advanced and 18 remained unchanged.

DS30, the blue-chip index of DSE, slumped by 1.64 per cent, or 30.15 points, to close at 1,799.41 points.

DSE Shariah index DSES shed 1.58 per cent, or 18.64 points, to close at 1,157.49 points.

Fortune Shoes led the turnover chart with its shares worth Tk 20.03 crore changing hands.

United Power Generation Company, Federal Insurance, JMI Syringe, Bangladesh Export Import Company, Sea Pearl Beach Resort, Dhaka Insurance, National Life Insurance, Continental Insurance and Prime Insurance were the other turnover leaders.

Vanguard AML Rupali Bank Balanced Fund gained the most on the day with a 10-per cent increase in its share price while Aziz Pipes was the worst loser, shedding 9.97 per cent.

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