The benchmark index witnessed an erosion of 4.4% over the fiscal year
The outgoing fiscal year has been an eventful year for the stock market with national elections right around the corner. Several significant landmarks have been achieved throughout the year followed by many other macroeconomic changes that gripped investors’ confidence.
Notable events during the year
Dhaka Stock Exchange (DSE) made a strategic partnership with Chinese consortium by making an agreement to sell 25% of its shares to Shenzhen Stock Exchange (SZSE) and the Shanghai Stock Exchange (SSE). This was one of the most awaited events of the year, strengthening confidence among investors. The agreement was signed in May 2018.
Following the stake sale, DSE signed a commitment letter with the United Nations Sustainable Stock Exchange (SSE) initiative on June 7 2018, joining nearly 75 stock exchanges worldwide committed to sharing information and working with stakeholders to promote the sustainability and transparency of capital markets.
Several other policy level decisions were made throughout the year in order to support the ailing market, particularly in the second half of the fiscal year.
Sufficient and lucrative IPOs still a far cry
Nine companies and two mutual funds have been listed in the stock exchanged during the outgoing fiscal year that raised Tk541cr, showed Dhaka Stock Exchange website. Although the amount of investment raised is higher than that of the previous fiscal year’s Tk390cr, experts claim the growth rate should be higher as the current rate is inadequate for a developing country such as Bangladesh.
The number of listed companies in the country is lower compared with other regional countries, said M Shaifur Rahman Mazumdar, managing director of Chittagong Stock Exchange.
Only 9 companies were listed in 2017, whereas listing of a good number of companies is a must for maintaining the present growth of the capital market, Mazumdar told the Dhaka Tribune.
“The number of listed companies was the highest in India, with the lowest in Bangladesh, and then Sri Lanka. As per the statistics of Registrar of Joint Stock Companies and Firms, around 150,000 companies are registered with the RJSC. Of this, just over 300 companies are listed,” he added.
ABM Azizul Islam, former advisor to the caretaker government, told the Dhaka Tribune: “The stock market regulators, stock exchanges and issue managers also cannot escape their responsibility in attracting companies to start listing with the stock exchange. The government should come forward with an effective step to enlist state-owned enterprises to increase supply of good shares”.
On the other hand, a total of 3 companies have raised Tk33 crore through right share issue in the FY 2017-18, which was Tk85 crore in 2016-17.
The year in numbers
Stock market performed poorly this fiscal year as it was followed by a year with strong gains in FY17. The benchmark index, DSEX closed at 5,405.5 points at the end of FY18 after booking a loss of 4.4% during the year. The DSE30 Index closed at 1,959.9 points, with the DSES Index closing at 1,263.8 points.
Average turnover stood at Tk645cr in each session in FY18, which was lower than the previous fiscal year by 11.9%. One-fifth of the turnover was generated by the engineering stocks, showed data obtained from Dhaka Stock Exchange.
During the year, trade turnover by foreign investors has increased by 17.18% than that of the previous fiscal year. The foreign investors contributed 7.37% of the market turnover during the period.
In spite declining index points, market capitalization at Dhaka Stock Exchange (DSE) has seen a rise of 1.22%, which is an increase of Tk4,634cr during the year.
As on June 28 of 2018, DSE market capitalization stood at Tk384,734cr against Tk380,100cr as on June 29, 2017.
Although indices fell and trading shrunk at the bourses, the market capitalization has increased in the outgoing fiscal year, said Mazumdar.
He added: Due to rise in market capitalization, the market strength is now better compared to previous years. Challenges ahead are to attract investors from home and abroad by bringing more renowned companies to the stock market.
The ratio of stock market capitalization to GDP stood at 17.12% as on April 2018. The ratio is significantly lower than many of the neighbouring countries such as India (80.69%), Pakistan (26.77%), Thailand (119%) and Malaysia (128.80%).
The ratio reflects the growth potentiality of the capital market, said an economy analyst of a brokerage house. The ratio is used to determine whether the overall market is undervalued or overvalued, he added.