Textile stocks feel the heat of the latest building collapse that has led many foreign importers to rethink about importing cloths from Bangladesh.
Since Rana Plaza building crumbled at Savar on April 24 morning that killed around 550 people as of yesterday, textile stocks shed nearly 4% despite some companies declared third quarter earnings which is considered to be impressive.
Textile sector that makes up 20% of the total market capitalisation of Dhaka Stock Exchange is under pressure due to the Savar tragedy, which analysts apprehend would put a lid on the earnings.
The companies that took a jolt most from the incident are Al-Haj Textile that shed 36%, Desh Garments 10%, Dulamia Cotton 9%, Alltex Industries 9% and Dacca Dyeing 4.54 % in the last six sessions.
“The profitability of the listed companies in the textile sector has already been under pressure due to prevailing political uncertainty and the recent incident will add injury to woes,” said Md Ashaduzzaman Riadh, senior analyst at the Lanka Bangla Securities.
He said the Savar incident is a glaring case of worst labor rights and poor compliance issues prevailing in the RMG sector of Bangladesh. “It will definitely make the buyers think seriously about placing orders in Bangladesh and increasing the future sourcing,” he said.
Textile sector continued bleeding over apparently gloomy outlook, culminated further over the aftermath of building crash tragedy, according to analysis of IDLC Investment.
As Q3 declarations spurred scrip-wise movements across the bourse, the ailing textile sector also made a turnaround on Thursday, driven by Rahim Textile and Malek Spinning that soared more than 10% in the past week.
World’s top clothing brands like Tesco, Walmart, H&M, C&F, VF and Celio have already decided to give up their investment in Bangladesh because of the political uncertainties, Evince Group Chairman Anwar ul Alam Chowdhury told the Dhaka Tribune recently.
The Walt Disney Co is pulling out of Bangladesh and several other developing countries, in part because of fatal accidents in factories that produced branded merchandise for Western firms, according to the Wall Street Journal.
The company has told licensees that it wants phasing out production of Disney-brand items made in Bangladesh, Pakistan, Belarus, Ecuador, and Venezuela.
The move was a part of an effort to shift the production of Disney-branded goods out of what it considers countries where factories run a high-risk of safety problems, including Bangladesh, Pakistan and Venezuela.
JC Penney is also phasing out the use of factories within multi-use buildings, a process that is expected to be completed in Bangladesh later this month.
Bangladesh Garment Manufacturers and Exporters Association estimated last month that the $20 billion-a-year industry had lost $500 million in orders in part to Indian rivals.
The garments make up 80% of country’s total exports with 90% of RMG products supplying to EU and US markets.
The World Trade Organisation declared Bangladesh as the second largest RMG exporter after China in 2010-2011.