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Dhaka Tribune

Investors give cold shoulder to dividend payouts

Update : 24 Mar 2014, 08:04 PM

Investors gave cold shoulder to the dividend payouts for the year 2013 by the listed companies, which were more or less same dividends compared to the previous year, analysts say.

It was clearly reflected in continuously declining volume of trade with high volatility in share prices even in the season of dividend declarations that usually pour during the period of February to April in the country’s stock markets.

Volume of trade declined more than 40% to 551 crore shares and, in value term, more than 50% to only Tk298 crore from February 27 as of yesterday at the Dhaka Stock Exchange (DSE).

The benchmark index DSEX remained range-bound with a band between 4700-4400 during the period.

“Dividend payouts fail to boost investor tempo,” said Wali-ul-Maroof Matin, managing director and chief executive officer of Alliance Capital Asset Management Company. 

Dividend declaration trend was flat, as out of the 257 companies listed with the DSE, so far 45 companies have declared dividends for 2013 to their shareholders.

Of them, 16 declared higher, 10 lower and 19 same dividends compared to the previous year.

But the bottom line is that gradual selling instead of buying shares by institutional investors, particularly banks, in line with the central bank’s directive might have caused the trading volume to decline, said Matain, also former chief executive officer of Chittagong Stock Exchange.  

Bangladesh Bank asked the commercial banks to reduce their capital market exposure to 25% of their equity by July, 2016 in accordance with the new bank company law.

Most companies have been able to declare dividends like previous year despite political unrest, as relaxation in some rules and incentives boost corporate earnings.

Of the incentives, the government provided 5% cash incentives to exporters to help them recover the losses caused by political unrest.

The central bank also relaxed loan rescheduling rules for businesses affected by the political instability, by suggesting lenders to reconsider the matter of loan rescheduling and down payment period on case-by-case basis for the affected borrowers in all sectors until June next year.

“Dividends paid out by the listed companies are mostly flat in 2013,” said Yawer Sayeed, a market expert.

Investors fail to gauge the market pulse amidst ongoing high volatility that dampens investor mood, he said. Moreover, investors are yet to heal wounds of 2010 market debacle. 

A DSE official at the surveillance department said the market is now dominated by the institutional and some big individual investors.  “Most institutional investor is engaged in financial netting, leading to decrease volume of trade, as no new funds have been injected into the market.”

Under the financial adjustment or money netting facility, anyone is allowed to purchase shares of any category of one’s choice immediately after completing a sale of any share.

A big individual investor said less than expected dividend declarations and some rules from the central bank put damper on investors. “In the last six months, I have not made any profits from the market. So, for what I’ll bet money.” 

He said institutional investors, even like state-owned ICB, have become day-trader for short term profits, creating market volatility in the market.

Mohammad Kashem, a retail investor, said volatility and falling volume is not encouraging investors, particularly retailers, to engage in stock trading.

Most of the financial institutions, including banks, failed to meet investors’ expectations of lucrative stock dividend, he said. 

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