A stock market expert has said indices and turnover are rising but there are doubts over how long this will last
The country's two stock exchanges have welcomed 2021 with a big leap, due to institutional investors' active participation.
DSEX, the prime index of the Dhaka Stock Exchange (DSE), jumped by 4.01%, or 216 points, to 5,618 on the first trading day of the year. It also hit a 21-month high.
Turnover, one of the major indicators of the DSE, rose by 25% to Tk1,925.77 crore while market capitalisation grew by 3.66% to Tk4,646.37 billion, the highest in history.
Port city bourse Chattogram Stock Exchange's (CSE) benchmark index CASPI also grew by 4.31%, or 672 points, to 16,265.
Khairul Bashar Abu Taher Mohammed, chief executive officer of MTB Capital Limited, told The Business Standard that news of India and the United Kingdom approving the Oxford-AstraZeneca vaccine influenced the growth of the stock indices.
"Because Beximco Pharmaceuticals has signed an agreement with the government to bring this vaccine to Bangladesh. News of the vaccine will reduce the uncertainty about economic recovery," he added.
EBL Securities Ltd said in its daily review that Covid-19 vaccinations had begun in countries that are Bangladesh's major trading partners.
Bangladesh paid over Tk600 crore in advance to the Serum Institute of India to purchase three crore doses of Oxford-AstraZeneca vaccine, and this has strengthened the confidence of investors in continued economic recovery.
Khairul said, "The stock market index has been rising for the past few months for four main reasons: decreased interest rates on bank deposits, declining bank investments, timely initiatives by the new leadership of the stock market regulator, and increased co-relations among regulators. Due to these reasons, money flow on the stock market has increased."
He said most of the banks, financial institutions and insurance firms have seen an increase in idle money.
"Meanwhile, most of the companies are investing in the stock market with the expectation of good returns as interest rates on deposits have fallen. The Bangladesh Bank has also facilitated this by allowing each bank to form a Tk200 crore special fund by taking out low-interest loans from the central bank to invest in the stock market," he explained.
Abu Ahmed, an honorary professor in the Department of Economics at Dhaka University, said stock market indices and turnover are rising but there are doubts about how long this will last.
He said there are some psychological factors about the stock market.
"For example, 5,000 is a psychological limit for an index. As the limit has been exceeded, the tendency of ordinary investors to take risks has increased," explained the professor.
He continued, "Meanwhile, the regulatory body has given brokerage houses the approval to open new booths at the union level in the country and abroad as well. Moreover, to apply for an initial public offering, investors must have a minimum investment of Tk20,000."
"These decisions will increase investment on the stock market. So, it can be assumed that the index will continue to rise," he added.
Meanwhile, when India approved the vaccine, shares of Beximco Ltd – which holds Beximco Pharmaceuticals' shares – topped the gainers' list and there was no seller of its stocks on Sunday.
Beximco Pharmaceuticals took second position on the gainers' list and its stocks rose by 9.97%.