Bangladesh: Stocks in free fall

DHAKA (The Daily Star/ANN) - Foreign investors’ retreat, panic sales bring key index to 39-month low.

Stocks continued to bleed Monday as foreign investors were selling off in droves amid panic sales by general investors, sending the benchmark index of the Dhaka bourse to a 39-month low.

Institutional investors were also on the sidelines due to a fund crisis, market analysts and stakeholders said.The DSEX, the Dhaka Stock Exchange’s key index, suffered losses for the third straight day yesterday, plunging by 62.25 points before closing at 4,533.75.

In the last three trading sessions the index shed 169.23 points, while Tk 9,066 crore was wiped out from market capitalisation.

“A lack of confidence is the main problem in the market and the news of economic indicators being gloomy fuelled it,” said Minhaz Mannan Emon, one of the DSE directors.

He said banks, merchant banks, and other institutional investors were also not playing a supportive role, for which long-term initiatives were necessary to revive investors’ confidence.
“We want to meet the finance minister and the governor of Bangladesh Bank to inform them about the market situation,” he added.A merchant banker, preferring anonymity, said investors have very little confidence in the market as the stock regulator failed to rein in manipulation.

Some junk stocks top the gainers’ or turnover list almost every day due to the manipulation but only a few have been punished, he said.

The Bangladesh Securities and Exchange Commission (BSEC) also failed to compel listed companies to maintain the minimum shareholding requirements, he pointed out.

In 2011, the regulator issued a circular, ordering sponsors and directors to hold a minimum 2 percent of shares of a company individually and 30 percent jointly. However, about 50 companies have failed to comply with the directive.

The merchant banker also said the liquidity crunch was very clearly understandable in the banking sector and the confidence crisis further held back investment.

An asset manager said investors do not trust financial statements of most of the listed companies for which they were not going for investment.

Some issue managers brought very weak companies into the stock market and investors were incurring losses investing in those.

The BSEC failed to ensure accountability of issue managers in the context of bringing over bad companies.

“A lack of good governance prevails in the whole market. So the index remains low year after year,” the asset manager said.

According to the DSE data, the DSEX has been hovering between 4,600 and 5,400 points for the last few years.

Square Pharmaceuticals, Grameenphone, British American Tobacco Bangladesh and United Power Generation snatched 28 points from the DSEX yesterday.

A top BSEC official, requesting not to be named, said the commission was disappointed as the market continues to fall despite the many incentives it has provided.

“What can we do?” he asked.

On good governance, he said they had started to punish manipulators, which was once almost absent.

Turnover, another important indicator of the DSE, also dropped 21.12 percent to Tk 275.29 crore yesterday -- a two-month low.

Losers outnumbered gainers as 233 closed lower, 64 ended higher and 53 remained unchanged on the DSE trading floor.

Square Pharmaceuticals dominated the turnover chart with transactions of Tk 8.90 crore followed by Sinobangla Industries, Daffodil Computers, British American Tobacco Bangladesh and National Tubes.

New Line Clothing was the day’s best performer with 9.55 percent gain while Daffodil Computers was the worst loser shedding 8.37 percent.

Chattogram stocks also fell with the bourse’s benchmark index, the CSCX, decreasing 93.89 points, or 1.10 percent, to finish the day at 8,391.41.

Losers beat gainers as 148 declined, 60 advanced and 29 finished unchanged on Chittagong Stock Exchange.

The port city bourse traded shares and mutual fund units worth Tk 14.67 crore.

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