Sign of recovery after four years of market crash in late 2010 still remains elusive despite some gains in 2014 when a few investors, once their fingers had burned, returned with their wounds barely healed, analysts say.
The investors believe that feeble macroeconomic performance and growing political uncertainty might rock the boat of the bourse in the New Year.
The benchmark index DSEX rallied 14% to 4865 in 2014 – its best year since 2011, when the market experienced boom and bust. Market value of listed companies – a yardstick of market depth – in 2014 stood at Tk325,000 crore, up 23% over the previous year and 2.73% made up of 17 companies listed during the period. The average daily turnover was Tk499 crore, soaring 24.75% during the period.
“The market basically was on falling side despite somewhat gains in 2014,” said former finance adviser to the caretaker government Mirza Azizul Islam. “It was like some point-gain one day to lose it in the next day,” he said.
He said index still remains half from maximum level in 2010 and below 5,000-mark despite 17 companies listed in 2014, which is the reflection of lack of confidence. “So, overall there is no sign of restoration of confidence.”
Former chairman of the Bangladesh Securities and Exchange Commission (BSEC) Farukh Ahmed Siddique sees the stock market of past year relatively better than the previous year. “Investors tried to heal their wounds this year but failed, as stability is yet to return.”
Alif Asset Management Company CEO Tanim N Sattar said new investors and a few investors, who stayed, put fresh funds on the market, making some gains in 2014. But a large number of investors who suffered four years back are yet to return, he said.
During stock market torment in 2011, many speculators and punters, who suffered severely from excessive leveraged buying, were still licking their wounds. A stock trader Mohammad Shahed has recently taken a much more active position in the stock market for the first time since the collapse of 2011.
“‘I was one of those people who got caught up in the bubble. I lost every penny and without my knowledge, my brokers had sold all shares in my portfolios worth Tk60 lakh I bought in late 2010 to adjust with negative account. However, early this year I put Tk4lakh but lost too.”
Shahed’s bitter story indicated that the relief was not arrived yet for many investors who invested at peak in 2010 until Wednesday, the final day of 2014.
Tanim said it will take a lot of time for index to reach a peak level. “If you expect that level right now, it will give rise the question of overvalued stocks. That’s a reality for investors now as the fourth anniversary of market crash arrives,” he said.
According to an unofficial estimate, around Tk14,000 crore is estimated to have got stuck and become non-performing because the borrowers do not have the capacity to repay.
Some accounts are so badly affected that even a 100% price increase won’t take them to positive territory, said a merchant banker.
Prospects in 2015 Glimmer of hope is waiting for investors in the New Year because of simmering political situation and weak macro-economy.
“2015 looks particularly dry taking growing political conflict and weak macroeconomic situation,” said Islam, also former SEC chairman.
He said most indicators of macro-economy are bad.
“Number one is export growth that is almost grounded to zero level over the last five months. Private sector investment is not growing. Financial sector is within a mess as non-performing loan is piling up and on the other hand, there is an excess liquidity. Though inflation remains at low level, the trend will continue due to stable commodity price in the local market and falling petroleum products’ prices in the international market,” he said.
He added that “Political instability is an additional woe. Taking all these into account, 2015 will not be any better than 2014.”
In the same breath, Siddique said political stability is the biggest factor for the stock market in the New Year. “The market actually might fail to see the return of full recovery until political concerns are at rest.”
