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Dhaka Tribune

Q3 2020: Bangladeshi capital market deemed Asia's best

Pakistan and Sri Lanka were the other two top performing markets globally in the quarter

Update : 12 Oct 2020, 12:32 PM

Defying odds amid the Covid-19 pandemic, Bangladesh’s stock market performed well during July-September period of 2020, emerging as Asia's best-performing capital market.

In terms of gains in the key index, Bangladesh’s stock market performance was also the highest in the world.

According to research by Asia Frontier Capital, DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), posted a double digit growth by 24.4% in Q3 (July-September), of 2020, the highest gain in key index among the world’s top performing stock exchanges.

Very attractive valuations, lower interest rates, smothered economic reopening after the shutdown to stop the spread of the coronavirus, better remittance inflow and recovery in export earnings have largely contributed to this rally, the report findings show.

Bangladesh’s exports earnings in July rose 44% to $3.91 billion, from $2.71 billion in June, while remittance inflows continued to rise and reached $2.60 billion in July.

It also said that the upward trend in key index had been led by domestic investors which reflected the positive investor sentiment on the ground despite continued foreign selling.

Meanwhile, Pakistan's stock market has risen as the second highest in Asia after Bangladesh. 

In the third quarter, the country's stock market rose to 19.40%, whereas Sri Lanka's stock market rose to third place with 17%.

Earlier, according to a Bloomberg report, the stock market of Bangladesh in August rose the highest among Asian stock markets and also performed the best in the world with a 15.8% gain in key index.

Why the market performed well

Stock market stakeholders welcomed the performance and attributed investors’ improved confidence to a boost by the restructuring of the stock market's regulatory body.    

“Stock investors were getting their confidence back due to some punitive and reformative action taken by the Bangladesh Securities Exchange Commission (BSEC) to bring about discipline in the market,” Abu Ahmed, an honorary professor at Dhaka University’s Department of Economics, told Dhaka Tribune.

The new commission has been trying to make the market investor-friendly. These efforts should continue for the sake of investors as well as for the economy, said the stock market analyst.

After taking office, the new board of the BSEC has taken lots of initiatives, such as strengthening monitoring to stop manipulation, mandatory shareholding by the directors, bringing more good companies in the market and taking steps to bring junk stocks into the main trading platform by improving their compliance and financial base.

In addition, a declining interest rate has encouraged investors to pour funds into the stock market instead of depositing them with the banks. 

“The recent steps taken by the commission, aimed at protecting retail investors’ rights and regaining their confidence, have begun giving out positive outcomes,” BSEC Chairman Prof Shibli Rubayat-Ul-Islam told Dhaka Tribune.

“We will not back down from the goal of establishing good governance in the capital market,” he said.

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Dhaka Stock Exchange recorded a negative index return of -16% between last February and June, according to an analysis.

During the period, the Indian NIFTY50 index fell by 37%, followed by 29% by the Pakistani KSE, 33% of USA S&P500 and 41% for Sri Lankan SPLK20LP. BOVESPA index of Brazil posted the highest loss, plummeting by 44%.

However, the Chinese SSEC index declined by only 13% during the period, the lowest slump during the same period.

Over the first six months of the year, the DSE key index declined by 483.65 points, shedding Tk 28,080.9 crore from market capitalization as it remained closed from March 26 to May 28 due to the lockdown to stop the spread of coronavirus.

On March 19, the BSEC launched a new circuit breaker to keep the stock market stable and to halt the free fall, which yielded a positive outcome for the indexes.



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