Market traders said the crisis in the financial sector is due to a liquidity crisis and hike in bank interest rates
The prime bourse, Dhaka Stock Exchange (DSE), fell as its benchmark DSEX index lost 231 points last month.
Market traders said the crisis in the financial sector is due to a liquidity crisis and hike in bank interest rates, dampening investor mood.
Increased investments in private placement, higher interest rates on savings certificates, and soaring non-performing loans in the banking sector, are the reasons for the liquidity crisis in the stock market, they said.
Elaborating, stakeholders said placement trading is the main reason for the liquidity crisis, as such trades are impacting the secondary market.
According to DSE trade data, the benchmark DSEX index lost 231 points in the last one month.
At the end of the month, the index was down to 5,491, which was at 5723.07 points on the first day of trading in March.
During the month, most of the large cap sectors showed negative movements except shares in Cement, Food & Allied, Fuel & Power, and Telecommunication. Food & Allied exhibited the highest positive movement with 1.03% gain and Engineering fell to its lowest,with a 0.84% loss.
In March, the prime bourse market capitalization lost Tk 27,717.45 million . Yesterday it stood at 4,119,653.37 million, which was at Tk 4,147,370.821 million on March 3.
Minhaz Mannan Emon, director of Dhaka Stock Exchange, told the Dhaka Tribune, that placement trading is the main reason for the liquidity crisis. Many big and small investors are investing in placement shares, impacting the secondary market. The money is going out of the main market to the secondary market, he added.
He also said placement trading is basically affecting the secondary market.
Second Vice President of Bangladesh Merchant Bankers Association (BMBA), and Managing Director of Green Delta Capital Limited, Md. Rafiqul Islam, told the Dhaka Tribune: “Investments in the private sector are increasing. It's very positive. But as investors are pulling out funds from the stock market to invest in new industrial ventures, a liquidity crisis becomes inevitable in the market.”
He believes the current market is good for long term investments.
Stock market analyst and Prof. at United International University, Dr. Mohammad Musa, told the Dhaka Tribune, ambitious promises like double-digit growth rates, lower interest rates, initiatives for downsizing default loans and reducing NPLs, failed to restore investor confidence in the capital market.
He suggested the government create a special fund for the stock market.