Stocks bleed as panic intensifies in bourses
The eased US inflation helped global stock markets bounce back at the end of last week as investors found at least a temporary breathing space but the Bangladesh stock market saw a further intensification of panic as soon as the trading opened on Sunday.
Dhaka bourse's blue-chip index DS30 and Shariah-compliant stocks' index DSES fell by more than 1% to drop below the recent low. There was a significant lack of buyers' enthusiasm to absorb the sharper selloff, regardless of how lucrative the stock prices are.
Stockbrokers and analysts said the investors' panic was regarding the macroeconomic issues – the risk of further devaluation of the taka and more inflation in coming days, the decreasing money market liquidity and upward pressure on interest rates - stressed corporate earnings and above all, the direction of the stock market itself.
More than Tk2,500 crore of market capitalisation in the Dhaka Stock Exchange (DSE) eroded in a day.
"It (Sunday) was a sellers' day. Except for a handful of small and mid-cap scrips, no stock survived the sharp fall," said Faisal Ahmed, a brokerage official at Motijheel.
The 25 advancing stocks helped arrest the broad-based index DSEX's fall within 0.77% or 6,304 points.
Absorbing a week-long selloff, many investors did not want their capital to erode further on Sunday especially when corporate earnings were not lucrative for a large number of companies, said Ahmed while explaining the added selling pressure on Sunday.
The bearish day ended with a 9.25% decline in the daily turnover in the DSE as some investors remained on the sidelines to wait and see what unfolds ultimately.
All the rise and fall of stock prices were happening leaving three in every four listed scrips stuck on their price floors the Bangladesh Securities and Exchange Commission (BSEC) imposed at the end of July.
The floor is not allowing any scrip to trade below the price level and since no buyer is found to be interested in the price, the scrips remained untraded on the bourses.
The expected market support from institutional investors is inadequate after the floor price as it holds stock prices higher artificially, said analysts, while foreign investors are selling off DSE stocks fearing further depreciation of Taka.
Many investors, since the beginning of the recent bearish leg one and half months ago, have been sceptical that the regulator might not stick to its commitment to not revoking the floor as long as it is relevant in terms of protecting investors' capital.
The top BSEC officials continue to say that it is not going to withdraw the artificial protection tool, despite the fact a large number of institutional investors are criticising the floor as it erodes market liquidity, hinders price discovery and hurts the market's resilience.
Also, the rising inflation that might force the central bank to lift its unconventional caps on the banking industry's lending and deposit rates became a new headache for stock investors nowadays.
Analysts said the recent macroeconomic updates – a $4.5 billion loan understanding with the International Monetary Fund, the government's confidence regarding a better weathering of the food and energy crisis in coming days – should have helped release some pressure on investors, but it did not.
On a bad day for all, some small-cap scrips and the SME scrips outperformed on Sunday.
