Stocks plunge on govt move to divert SoE funds

Key index hits 32-month low on panic selling

Staff Correspondent | Published: 00:00, Sep 12,2019


Dhaka stocks plummeted on Wednesday with the key index hitting a 32-month low as panic-stricken investors continued selling shares as liquidity concerns were ignited amid the government’s move to divert state-owned corporations’ funds to the exchequer.

DSEX, the prime index of the Dhaka Stock Exchange, plunged by 1.51 per cent, or 75.78 points, to close at 4,933.17 points on Wednesday after losing 24.83 points in the previous session.

The DSEX hit a 32-month low after December 21, 2016 when the index was at 4,924.33 points. The index lost 303 points in last 13 trading sessions with just three positive sessions.

The market started falling sharply from the beginning of the day’s session and descended more firmly as the time progressed on panic-driven share sales amid concerns over a dearth of liquidity in the banking sector, market operators said.

The government last week decided to divert state-owned corporations’ funds worth Tk 2,12,100 crore to the exchequer despite the fact that the country’s financial sector has been suffering from liquidity crisis.

DSE director Rakibur Rahman told New Age on Wednesday that lack of confidence was the prime reason for the current downfall and the banks became reluctant to invest in the capital market, apprehending risks.

He said that the BSEC should handle the menaces in the market with a firm hand and the influential fraudsters and manipulators should be punished to regain the investors’ confidence.

The foreign investors were running for an exit due to unpredictable regulatory moves by different regulators, Rakibur said, adding that all the regulators should work in unison to avoid any policy-related conflict in future.

Former DSE Brokers’ Association president Ahmed Rashid Lali said that the capital market had been passing through a rough phase due to volatility in the banking sector and prolonged tussle between Grameenphone and the telecom regulator.

The government’s move to divert state-owned corporations’ funds to the exchequer might worsen the liquidity condition in the banking system, he said.

Market operators said investors were scratching their heads about which way to go as prolonged bearishness sent them to the edge.

The continued plunge wiped off Tk 18,746 crore in last 13 sessions and Tk 51,887 crore in last seven months of the market capitalisation.

The activities of market regulator Bangladesh Securities and Exchange Commission including approving weak initial public offerings, shying away from taking actions against errant people, allegedly assisting some quarters, and failing to diversify the market raised questions about its role.

EBL Securities in its daily market commentary said, ‘The prime bourse slumped below the “psychological” threshold of 5,000 points after a major setback in a 32-month low, as investors’ confidence got shattered, which triggered panic sales during the depressed market outlook.’

Market operators said the government repeatedly had failed to rein in the surge in non-performing loans in banks and bring down banks’ interest rates to single digit that kept the financial market volatile.

Besides, investors were grappling with the tussle between Grameenphone and telecom regulator over unpaid audit claim that pulled down the share prices of the company to a two-year low in last week.

The foreign investors have also been taking out investments in recent months. The investors withdrew around Tk 619 crore in last six months (March-August) from the Bangladesh capital market.

The average share prices of all the sectors dropped on the day.

The share prices of energy sector dropped by 3.3 per cent, textile 2.7 per cent, bank 1.6 per cent and telecommunication 1.1 per cent.

Despite the bearish sentiment at the market, the share prices of Monno Jute Stafflers continued soaring since July 22 and reached Tk 2,032.5 per share on Wednesday from Tk 688 per share. The share prices of the low-profile company witnessed a fall only in five sessions in the period.

Investors termed the company ‘gambling item’ as the share prices of the company were hiked by some manipulators again and again.

Last year, the share prices of the company crossed Tk 5,600 per share under the nose of market regulator and dropped to Tk 1,330 for the adjustment of 350 per cent bonus shares.

Out of the 352 scrips traded on Wednesday, 288 declined, 37 advanced and 28 remained unchanged.

Turnover on the bourse increased to Tk 502.42 crore on Wednesday from Tk 407.03 crore in the previous session.

DS30, the blue-chip index of the DSE, slumped by 1.24 per cent, or 21.92 points, to close at 1,736.18 points.

DSE Shariah index DSES shed 1.19 per cent, or 14.01 points, to close at 1,155.49 points.

National Tubes led the turnover chart with its shares worth Tk 26.88 crore changing hands.

JMI Syringe, Beacon Pharmaceuticals, Monno Ceramics, Stylecraft, Monno Jute Stafflers, VFS Thread Dying, Wata Chemicals, IPDC Finance and Square Pharmaceuticals were the other turnover leaders.

National Tubes gained the most on the day with a 9.93-per cent increase in its share prices while ML Dyeing was the worst loser, shedding 9.56 per cent.

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