Shares in banks trigger the fall
The country's prime bourse on Monday passed another torrid day with substantial selling pressure, losing 68 points or 1.54% of market value.
Investors were in a rush on the day for selling their shares to avoid further losses, market insiders said.
The trend of sell-off intensified while the capital market traders’ tension increased over the banks’ profitability amid the government move for bringing down the lending rates to single digits, analyst said.
They also observed that few other factors including liquidity crisis, aggressive bank borrowing by government, declining outstanding foreign portfolio investment, sluggish earning growth and poor payout ratio of listed companies, deepened the tension of investors.
Beside, tussle between Grameenphone and telecom regulator and post-dividend free-fall price adjustment of large cap companies hurt the market.
Key index of Dhaka Stock Exchange (DSE), DSEX closed at 4,331.9 points on Monday after losing 1.54% during the session while broad index of Chittagong Stock Exchange (CSE), CASPI declined 1.11% to close at 13,233.6 points.
It was the lowest level of the DSEX, in 43 months since May 17, 2016, when the index was 4,326.
Participation in the Dhaka Stock Exchange, however, stood at Tk375.8 crore during the session, which was Tk292.5 crore in the previous session.
EBL Securities in its daily market commentary said that declining macroeconomic indicators, banking sector's NPL woes and push for implementation of single-digit interest rate have exacerbated the already diminishing investor's confidence.
As a result, DSEX has failed to sustain any upward swing for a considerable period since the last couple of months.
On December 30, Finance Minister AHM Mustafa Kamal announced that the banks on April 1 would implement 9% lending rate for all sectors as per Prime Minister Sheikh Hasina’s instruction — a move taken to spur private investment, industrialization and job creation.
A total of 21 banks closed the session on Monday in negative territory, while only three closed in the green zone and six remained unchanged out of the 30 listed banks.
Banks seem to be taking a bigger hit for the second consecutive day due to the news regarding the possibility of capping of lending and deposit rates.
AS a result, major big banks like Brac Bank, City Bank and Eastern Bank lost 6.7%, 2.2% and 0.9%, respectively with the overall banking sector experiencing 2.1% drop in value, says the daily market analysis of UCB Capital Management Limited.
Requesting anonymity, a stock broker said the new lending rate would negatively impact banks’ profit. Their stock price will come down. Already this expectation has impacted their current stock prices.
Market analysts and insiders said that the investors had been suffering from a lack of confidence for long while disappointing data on major macroeconomic indicators were dampening investors’ confidence badly.
The second consecutive day due to the investors found no immediate solution to the current market turmoil in the finance minister’s meeting on Thursday.
Finance minister AHM Mustafa Kamal held a meeting with the market regulators and Dhaka bourse to find out solutions to the market plunges.
Market operators that Kamal did not mention any immediate solution to the current bearishness at the market.
Among the traded issues 63 gained, 253 declined and 39 remained unchanged during the session in Dhaka Stock Exchange while 50 gained, 163 declined and 27 remained unchanged in Chittagong Stock Exchange.
Meanwhile, ADN Telecom Limited, which made debut on Monday, gained 50% from its offering (IPO) price of Tk27.00 to general investors which was Tk30 for institutional investors under book building method.