Stocks continue to plummet

Dhaka stocks have seen a steep fall, biggest single day drop in the last four-and-a-half years, as investors’ confidence continues to erode prompting them to go on a selling spree. Stakeholders however are saying that the market is suffering due to liquidity crisis caused by the Bangladesh Bank regulatory measure to rein in aggressive loan disbursement of bank loans. Looming political uncertainty is another reason behind the fall. With a drop of 2.2% or 133 points, DSEX, the key index of the Dhaka Stock Exchange (DSE) slid down to 5,888.3 points, the single day highest fall since June 10, 2013. In the last four trading sessions, after the announcement of the monetary policy, DSEX has seen a 4.66% or 288 points fall. Daily turnover at the premier bourse stood at Tk3.6 billion on Sunday. Today’s turnover was 10.8% higher than the previous session’s value. Banking sector, which contributed 23% of total daily turnover of Tk3.6 billion, played a bigger role to pull down the index, with 29 out of 30 banks recording price fall on Sunday. Only National Bank Limited showed no change in price movement. On Tuesday, Bangladesh Bank slashed the loan-deposit ratio for conventional commercial banks by 1.5% to 83.5% with a view to curbing excessive lending.

With a drop of 2.2% or 133 points, DSEX slid down to 5,888.3 points on Sunday Photo: Mehedi Hasan

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“Market is still reacting negatively to the monetary policy statement published last week and also the anticipated political instability of this week,” LankaBangla Securities said in its regular stock market commentary. “Stock prices saw the steepest fall as investors went on panic sell-off, frightened by the relentless fall. Liquidity crisis in the money market also created fund shortage, expediting the fall,” Ahmed Rashid Lali, a stock broker, told the Dhaka Tribune. “Institutional investors went on selling to bring investments within limit as the BB has asked to reduce ADR,” he added. Reducing ADR will tighten the money supply in the money market, which may push interest rate up and make stock investors fly to bank deposits, said Ahmed. As per the central bank’s direction, advance-to-deposit ratio (ADR) for conventional banks has been fixed at 83.5% instead of the existing 85%, while investment deposit ratio (IDR) for shariah-compliant Islamic banks has been set at 89% instead of the current 90%. Meanwhile, in a media briefing, stakeholders including merchant banks, stock brokers and stock exchanges opined that the market is going through a downswing as the institutional investors have lost their capacity to pour in new funds. They demanded calculation of banks’ stock market exposure based on cost prices instead of market prices. They claimed that it would increase the cash flow in the market. “Institutional investors are not seen in trading. I think there is a problem with the investment capacity of institutional buyers,” Mohammed Nasir Uddin Chowdhury, president of Bangladesh Merchant Bankers Association, told the Dhaka Tribune. The authorities concerned have to take steps to address the issues, so that institutional buyers’ participation in the market can be increased, said Nasir. Asked about a liquidity crisis in the market, Nasir said the supply of funds depends on the investment decision. “Since there is instability among investors about the market direction over the continuous fall, the market is going through a downward trend,” said Nasir, the managing director of Capital Market Operations at LankaBangla Investment Limited. “I think investors should hold on to remain safe from losses as panic sell-off can drive them in the wrong direction,” he added.

Political uncertainty

During the trading session at different broker houses, it was seen that investors were talking about the verdict of Zia Orphanage Trust corruption case against BNP Chairperson Khaleda Zia. “I have noticed that some investors went on selling to remain safe as fear gripped them,” a stock broker told the Dhaka Tribune, seeking anonymity. Those who were absent from the trading floor made sell orders over phone, said the stock broker. “It is better to sell stocks than taking the risk of political uncertainty,” Mohammad Asraful Alam, a stock investor told the Dhaka Tribune. The verdict of Zia Orphanage Trust case against Khaleda Zia and her son Tarique Rahman is scheduled to be delivered on February 8.