What is dragging Dhaka stocks down again and again?
Following a short-lived recovery, Dhaka stocks nosedived again last week, just like they had been doing for months.
Investors who held instead of booking their quick profits mostly ended the week with frustration in the market, which is showing bare directional indications, according to stockbrokers.
The time, both globally and locally, is complex nowadays, and amid the upward pressure on interest rates, large investors are not much interested in making big bets on the volatile stock market, while short-term profit booking seems to have been proved to be the safer strategy, said market analysts.
DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), gained nearly 100 points in the two weeks until 9 March, recovering only half of what it lost over a month.
As sellers gained strength, they dominated the entire week through last Thursday, causing the DSEX to fall 40 points, or 0.64%, to close at 6,220.
Only 15 scrips gained, while 141 declined.
Analysts said the market recovery in the earlier part of the month was mainly a positive response from investors who cheered the regulatory development of not withdrawing the floor prices right now alongside letting 169 scrips breathe freely above the floor.
Investors who catch the falling stocks in the oversold areas come up with sell orders as soon as their stocks rise by 10-30%.
As fund managers say, having cash on hand during market bottoms is a significant edge in the investing business.
The complexity right now
The local macroeconomic situation was yet to show any impressive improvement that might boost investors' confidence while the bank ran in the US, and a risk of spillover appeared to be a new headache, said analysts.
However, emerging and frontier market investors have got some useful side effects from the western banking issues.
For instance, the US Federal Reserve is expected to go slowly with further rate hikes intended to combat inflation after the banking crisis that knocked on their doors through the failure of two US banks, while the Swiss banking giant Credit Suisse is also in trouble now.
Also, the US dollar and commodity prices are cooling down in response, which is good news for the economies like Bangladesh as long as they continue without dragging down the developed markets into recession, as that might cause a fall of the developing world's exports.
Meanwhile, restrictive measures in Bangladesh, including an interest rate cap and a stock market floor price, have been building pressure on both over the past few months as they cannot correct in line with the market dynamics, while investors are always in fear of what may happen if the restrictions go away.
Puzzled investors' preference to remain on the sidelines reduced daily average turnover in the DSE by 21.4% last week to Tk508 crore.
Thanks to the less than one-third of the listed scrips that had bidders during the closing bell on Thursday.
No sector except for food and telecommunication could withstand the selloff last week.