Dhaka stocks kept sinking for the third day on Tuesday as bank scrips continued to take a beating amid the investors’ deepening worry about the banks’ profits on the eve of the implementation of single-digit lending rate.
DSEX, the prime index of Dhaka Stock Exchange, lost 1.16 per cent, or 50.52 points, to close at 4,281.43 points on Tuesday, hitting almost a 45-month low.
The DSEX declined by 177.85 points in last three sessions.
Tuesday’s index hit the lowest after April 15, 2016 when it was at 4,275.47 points.
Market operators said the investment sentiment worsened further on the day as frustrated investors continued selling bank shares.
The prime minister Sheikh Hasina’s announcement made on Monday that banks must implement the single-digit lending rate from April aggravated the investors’ worries over the bank scrips, they said.
Hasina in a meeting with banks’ owners said that banks must bring down the lending rate as all of their demands were met.
The bank scrips have been falling since the finance minister AHM Mustafa Kamal’s announcement made in the last week of December that banks must bring down the deposit rate to 6 per cent and the lending rate to 9 per cent.
Businesses, especially apparel sector entrepreneurs, have been demanding single-digit lending rate saying that high interest rate was affecting industrialisation and caused a slowdown in economy.
Bankers said that if banks were to implement deposit rate at 6 per cent, many of the banks would find them in trouble as they had already taken long-term deposit with interest rate up to 10 per cent.
The 9-per cent lending rate for all old and new loans would ultimately eat into banks’ profits as many of the banks would not be able to cut deposit rates on old deposit.
The bank sector, which holds the highest market capitalisation on the country’s stock market, lost 1.6 per cent on Tuesday after it had decreased by 2 per cent in the previous day.
Stock investors have remained dissatisfied over the banks’ performance in last few years as most of the banks declared poor dividends amid soaring bad loans and any further profit decline would encourage the banks to reduce dividend even more, said market operators.
The market has been in the doldrums for almost two years, excepting January 2019, amid a host of reasons including woes in the banking sector, lack of governance in the capital market, and Grameenphone’s dispute with the Bangladesh Telecommunication Regulatory Commission over an audit claim.
The government and the stock market regulator, Bangladesh Securities and Exchange Commission, have failed to solve the main problems the market is facing.
Investors lost their confidence and hope as they saw no improvement in the market after the 2010-11 market debacles.
Widespread anomalies, falsification of financial statements, approval of initial public offerings of weak companies with huge placement shares, unpredictable regulations and no product diversification gradually weakened the market.
The DSEX lost 1,668 points in last 11 months’ rout that eroded almost Tk 84,647 crore in market capitalisation.
Market operators said that the worsening market situation gave investors the notion that the market was beyond understanding of the government.
A recent meeting between the BSEC and the DSE and finance minister AHM Mustafa Kamal also failed to bring any solution to the market woes.
The blue-chip index, DS30, a composition of 30 largest and better companies, hit an all-time low on Tuesday. The DS30 was launched on January 1, 2013 with 1,460.30 points.
Former adviser to an interim government AB Mirza Azizul Islam told New Age on Tuesday that the market continued falling due mainly to lack of confidence of investors.
‘The market regulator has failed to bring good companies including the government-owned and multinational companies to the market, which is a weak side of the current commission,’ said Mirza Aziz, also former chairman of the BSEC.
He said the resolution of the tussle between Grameenphone and the telecom regulator remained elusive.
To fix the capital market problems, he suggested overhauling the banking sector and bringing better companies to the market through negotiation or policy support.
EBL Securities in its daily market commentary said, ‘Investors’ confidence in the market has shattered and worries over ever falling index coupled with no supportive measures from the meeting with the finance minister made investors pessimist about a quick recovery.’
‘Most of the fundamentally trusted securities are also facing heavy correction amidst the current doldrums on the market,’ it said.
The BSEC in recent years has indiscriminately approved a number of IPOs that triggered criticisms against the regulator.
Despite criticisms over the approval of Coppertech Industries, the BSEC approved Ring Shine Textile which raised Tk 275 crore through private placement before raising Tk 150 crore from the capital market.
The share prices of Ring Shine sank below face value within 15 trading session to end at Tk 9.2 per share on Tuesday.
The media also reported that the foreign investors continued pulling funds out of the market for the second year in 2019 that made investors more nervous on the trading floor.
The share prices of City Bank, BRAC Bank, Grameenphone and Square Pharmaceuticals plunged heavily on Tuesday.
The average share prices of almost all the sectors dropped on Tuesday.
The share prices of textile, bank, telecommunication and non-bank financial institution decreased by 1.9 per cent, 1.6 per cent, 1.1 per cent and 0.5 per cent respectively.
Turnover on the DSE dropped to Tk 327.46 crore on Tuesday from Tk 375.81 crore in the previous trading session.
Out of the 343 scrips traded on Tuesday, 269 declined, 42 advanced and 43 remained unchanged.
DSE blue-chip index DS30 lost 1.07 per cent, or 15.63 points, to close at 1,436.26 points on the day.
Shariah index DSES shed 1.03 per cent, or 10.15 points, to end at 972.98 points.
ADN Telecom led the turnover chart with its shares worth Tk 27.64 crore changing hands on the day.
LafargeHolcim Bangladesh, BRAC Bank, Khulna Power Company, Standard Ceramics, Paramount Insurance, SS Steel, Mutual Trust Bank, Pubali Bank and City Bank were the other turnover leaders.
SS Steel gained the most on the day with a 7.37-per cent increase in its share prices while Zeal Bangla Sugar Mills performed the worst, losing 9.91 per cent.
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