Stocks’ fall widens as investors weigh impact of 9pc lending rate on banks

Staff Correspondent | Published: 22:17, Feb 25,2020 | Updated: 22:17, Feb 25,2020

 
 

Dhaka stocks dropped for the fourth day on Tuesday as investors kept selling shares amid worries about the possible impact of 9 per cent lending rate on the economy, especially on the country’s ailing banking sector.

The Bangladesh Bank on Monday issued a circular, putting cap on lending rate for all kinds of loans except the credit card at 9 per cent from April 1.

DSEX, the key index of the Dhaka Stock Exchange, lost 0.63 per cent, or 29.69 points, to close at 4,621.19 points on Tuesday. The DSEX lost 137 points in the last four sessions.

In line with the previous session, the core index started falling from the very beginning on Tuesday, and a rebounding move in the middle of the session fizzled out due to mounting share sales in late trading, market operators said.

They said that investors became concerned about the possible impact of the single-digit interest rate on the banking business and overall industries.

The ceiling on lending rate came when the country’s economy including the banking sector is struggling.

Market operators said that the forceful implementation of the single-digit rate would directly affect the banks’ profits as the interest was the main source of the banks’ income.

Besides, depositors would be reluctant to keep money in banks while banks, which are reeling under the burden of a huge amount of non-performing loans, would be cautious in lending money at the rate and it would subsequently affect the overall industry, they said.

EBL Securities in its daily market commentary said, ‘The market got a nosedive at the beginning of the session as bank, the largest sector, faced havoc on the central bank’s directive to set a maximum 9 per cent interest rate on all loans except credit card from April 1.’

Investors, fearing banks’ struggle in progressing business on the coming days went for massive sell-offs of bank scrips, it said.

The media reported that banks would also have to bring down the lending rate of all the existing loans and advances within 9 per cent from April 1 this year.

Bankers said that single-digit rate for the small and medium entrepreneurs would affect some banks including BRAC Bank which had big exposure to SME and retail loans.

Share prices of BRAC Bank plunged by 8.45 per cent on Tuesday.

Besides, share prices of GP continued to nosedive as the Appellate Division ordered on Monday that the telecom operator must pay additional Tk 1,000 crore in audit claim in three months to the Bangladesh Telecommunication Regulatory Commission in three months after the operator paid Tk 1,000 crore to the regulator on Sunday.

Share prices of GP plunged by 2 per cent to close at Tk 292.4 on Tuesday as the investors became concerned over the financial implications of the payment of Tk 2,000 crore to the BTRC on the company’s balance sheet this year.

Apart from the GP issue, a section of the investors were disappointed to see no visible progress in the formation of a special fund for the stock market by the scheduled banks even after two weeks they were granted the permission.

The central bank on February 10 issued a circular allowing each scheduled bank to borrow up to Tk 200 crore from it at low interest rate to invest in the stock market.

A section of investors took cautious approach as companies started declaring annual financial reports for the 2019 and some companies including IDLC Finance and British American Tobacco Company had announced profit fall for the period.

The banks are making preparations to declare dividend and post their annual financial earnings soon.

The average share prices of telecommunication sector dropped by 1.9 per cent, bank 1.7 per cent, non-bank financial institution 0.3 per cent and energy 0.1 per cent.

The turnover on the DSE advanced to Tk 629.68 crore on Tuesday from Tk 600.5 crore in the previous trading session.

Out of the 356 scrips traded on Tuesday, 179 advanced, 125 declined and 51 remained unchanged.

DSE blue-chip index DS30 shed 1.28 per cent, or 20.24 points, to close at 1,550.97 points.

Shariah index DSES lost 0.33 per cent, or 3.63 points, to end at 1,069.93 points.

BRAC Bank led the turnover chart with shares worth Tk 20.05 crore changing hands on the day.

VFS Thread Dyeing, Indo-Bangla Pharmaceuticals, Grameenphone, Orion Infusions, Fortune Shoes, Saiham Cotton, Summit Power, Square Pharmaceuticals and Orion Pharmaceuticals were the other turnover leaders.

CVO Petroleum Refinery gained the most on the day with a 9.95-per cent increase in its share prices while BRAC Bank fared the worst, shedding 7.72 per cent.

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