Stocks slump by 26pc in FY20

Staff Correspondent | Published: 23:19, Jun 30,2020

 
 

Dhaka stocks ended slightly up on Tuesday, the closing day of the financial year 2019-20, as few investors kept buying shares at the BSEC-set floor prices, but the overall market situation in the year was gloomy due to the coronavirus pandemic and poor confidence.

DSEX, the key index of the Dhaka Stock Exchange, lost 26.42 per cent, or 1,432 points, in FY20 to close at 3,989.08 points on Tuesday. The index was at 5,421.62 on June 30, 2019.

The market was in a downward trend in 2018, but the situation worsened in FY 2019-20 due to a host of reasons including widespread anomalies on the market, absence of proper disciplinary measures, Grameenphone’s tussle with telecom regulator and the government’s little attention towards the market, market operators said.

They said that investors were also spooked by the approval of poor and fundamentally weak initial public offerings by the Bangladesh Securities and Exchange Commission and financial statement engineering by a number of companies that drastically reduced foreign investments in the market.

Investors’ confidence hit rock bottom as they found no immediate recovery steps from the government, market operators said.

They said that the outbreak of coronavirus in the country hit hard the market.

On Tuesday, the DSEX gained 0.18 per cent, or 7.44 points, to close at 3,989.08 points. The DSEX added just 27 points in the last six sessions.

The market witnessed its longest gaining spell, though added minimal points, after June 2019 as few investors went for bottom fishing amid the BSEC-imposed price fall ceiling that bars investors from selling shares at prices lower than the cap.

Share prices of more than two-thirds of the listed companies were stuck at the floor prices that lured some investors into buying shares at the lowest possible prices.

However, the market remained gloomy with poor participation from investors, especially retail ones, as the coronavirus situation continues worsening.

The COVID-19 epidemic has been a heavy drag on the market from early February when world stocks faced a sharp fall.

The situation started deteriorating since March 8 when the country detected first coronavirus infection cases and reported the first death on March 18.

On March 19, the BSEC introduced a system called floor price system to check any sharp fall in share prices amid the pandemic.

The system, however have brought the market to a standstill since June 2 as more than two-thirds of the companies hit the floor prices, but investors remained reluctant to buy shares.

The government was forced to announce general holidays from March 29 to May 30 to contain the spread of the virus.

With the highest daily death toll of 64 and 3,682 new infection cases on Tuesday, the death toll from the deadly virus reached 1,847 and the number of total cases of infection stood at 1,45,483.

On June 29, the government passed the Finance Bill-2020 in parliament.

According to the bill, after paying 10 per cent tax to the government, undisclosed money can now be invested in the stock market without facing any question with one-year lock-in, instead of three years.

The formation of around Tk 1,700 crore in special funds for investing in the market by 14 banks might also encourage few investors, market operators said.

Some large investors preferred the DSE block market for transactions as they could buy shares on the block market even below the floor prices, they said.

The turnover on the bourse advanced to Tk 555.71 crore on Tuesday compared with that of Tk 154.66 crore in the previous trading session.

Of the total turnover on Tuesday, Tk 467.7 crore came from block transactions.

EBL Securities said, ‘Investors showed positivity on making fresh investments based on earnings declarations in the market despite the number of coronavirus cases continued rising with looming uncertainty about economic growth.’

‘Additionally, a reduction in lock-in period for unreported money to one year from previously proposed 3 years will ease the investment case scenario for the capital market as investors are cheered that the amendment will be able to assist long-term liquidity and fund flow on the market,’ it said.

Of the 286 scrips traded on the DSE on Tuesday, 38 advanced, 24 declined and 224 remained unchanged.

DSE blue-chip index DS30 increased by 0.4 per cent, or 5.47 points, to close at 1,340.98 points on the day.

The DSES index also added 0.16 per cent, or 1.51 points, to settle at 925.08 points.

Beximco Pharmaceuticals led the turnover chart with its shares worth Tk 12.65 crore changing hands on the day.

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