'It is not the case with a single company; all companies in the market are having their share prices going from bad to worse'
Defying all government efforts to infuse fresh blood into the dying stock market, share prices at the Dhaka Stock Exchange (DSE) have continued their headlong dive, pushing the investors to their limits.
In the last 10 trading sessions in the new year, the market lost Tk26,154cr or 7.7% capitalization in continuation of the last year's Tk51,732 crore or 12.33% market cap loss.
The key index, DSEX, of Dhaka bourse lost 416 points in the sessions.
“In April last year, I bought share of Brac Bank at Tk80.20 each, which came down to Tk47.60 yesterday,” Asif Islam, a stock investor, who lost 40.64% of his invested money, described his woes to Dhaka Tribune.
"It is not the case with a single company; all companies in the market are having their share prices going from bad to worse," he lamented, eyes in tears.
His frustration grows even more when he thinks that all government steps have failed to bring stability to the wobbly stock market.
Government steps to prop up stocks
A string of policy interventions and regulatory measures aimed at salvaging the moribund stock market failed to fix the capital market.
The stock market regulator, the Bangladesh Securities and Exchange Commission (BSEC), in July amended a number of security rules on capital raising through initial public offerings (IPOs) and quota facility for the general investors, targeting to revive the market.
The commission in the same month also increased the existing one-year lock-in provision for the placement shareholders to a two-year period to boost the normal business activities of the capital market and lessen the unfair influence of private placement holders.
The stock market regulator also issued a directive to bourses to put 50% circuit breaker on share prices of newly listed companies for the opening two days to prevent their abnormal price movement.
IPO quota facility for the general investors was raised to 50% from existing 40% under the fixed price method while under the book building method it was raised to 40% from 30% to build confidence in the market.
The BSEC decided to allow non-listed firms, bonds and debentures for trading their shares under a new platform called Alternative Trading Board (ATB) and Investment Sukuk Rules, 2019.
In 2019, Bangladesh Bank eased advance-deposit ratio (ADR) of banks by 1-1.50 percentage point apparently to increase cash flow of banks to kick start gloomy investment scenario for both real economy and stock business.
in the same year, the central bank announced in a circular that fresh liquidity support would be given to banks to raise their respective portfolios in the capital market up to the regulatory limit directly or through subsidiaries.
In the period, the DSE and Shenzhen Stock Exchange (SZSE) jointly launched cross-border match-making platform called V-Next, a one-stop pitching mechanism among qualified investors, intermediaries and start-ups to promote the Small and Medium Enterprise Board. Beside, DSE has lunched SME platform.
The current finance bill FY2019-20 fiscal year made a 10% tax on the excess reserve of a publicly traded company exceeding 70% of its paid-up capital mandatory.
But, nothing worked to restore the health of the ailing market.
“Liquidity crisis is one of the major reasons for the stock market's free fall. As a result, steps taken so far have not become effective,” Professor Mizanur Rahman of the Department of Accounting and Information Systems at Dhaka University told Dhaka Tribune.
He puts emphasis on restoring stability in the financial sector to make fresh fund available, otherwise the trading floor will not get momentum.
On top of that, investors want to see a manipulation-free stock market, where they can trade without fear.
“Publicly traded companies are giving fabricated financial statements, while the manipulator are gaining from the rumor-based trading,” said Shariful Islam, a retail investor.
Market on Tuesday
The country’s prime bourse yesterday passed another horrible day, losing 87.24 points or 2.11% of market value.
Broad index of Dhaka Stock Exchange (DSE), DSEX closed at 4036.23 points while broad index of the port city’s bourse, Chittagong Stock Exchange (CSE), CASPI shed 270 points to close at 12,300 points.
It was the lowest level of the DSEX, in 56 months since May, 2015, when the index was 4,014.
Protest against the continued fall
In protest against the continued fall in stock prices, small investors demonstrated in front of the Dhaka Stock Exchange old building at Motijheel in the capital after the day's trading closed at 2:30pm on Tuesday.
Hanif Bepari, an investor in the protest, said the current commission failed to implement the rules and regulations the BSEC formulated to establish accountability in the market.
Yesterday, trading activities remained poor as most of the investors were unwilling to inject fresh funds into the ongoing bearish trend of the market.
The daily turnover at DSE stood at Tk263 crore, down by 8.4% or Tk24 crore compared to Tk287 crore in the previous session.
On the day, among the traded issues, 32 gained, 293 declined and 30 remained unchanged during the session in Dhaka Stock Exchange while 21 gained, 203 declined and 20 remained unchanged in Chittagong Stock Exchange.
DSE Shariah based index DSES declined 2.47% to end at 907 points, while blue-chip index, DS30 went down by 1.88% to close at 1,361.6 points.
Investors were in a rush on the day for selling their shares to avoid further losses, market insiders said.
Stock market analysts and brokers largely blame investors’ shaky confidence, liquidity crisis, poor performance of companies, falling macroeconomic indicators and sell-offs by foreign investors for the free fall.
In addition, Grameephone tussle with the telecommunication regulator and fear over distressed earnings once the single digit lending rate would take effect in April gave the investors a gloomy picture, said the stock broker.
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.