The Dhaka stock market remained range-bound over the past five months due to uncertainty on the political front, while dropping the volume of the market.
In that period, the benchmark DSEX went down to around the 3,800-mark on three occasions from just above 4,200 points.
Analysts described the current market as “range-bound,” which means it fluctuates within a certain range, in this case because most investors prefer to book profits quickly on the excuse of political uncertainty in the run-up to the next general election.
The market is touching the highest threshold with the announcement of good news and coming down to the lowest with the announcement of bad news, making the market highly volatile, the analysts explained.
“Range bound and choppy, that’s the order of these days,” said an analyst at Lanka Bangla Securities.
The volume of the market remained at 73.2m shares – a decrease from 91.8m five months ago – indicating that a bearish mood dominated the market as investors felt jittery over the political upheaval in the coming days.
The market has seen some amount of quick profit booking with sales gathering momentum, said a fund manager. “Given the kind of low participation that we are witnessing now, I don’t think there will be great moves on the higher side,” he said.
Most investors, including foreign investors, apparently decided to take profits at the current high levels, as was reflected in declining foreign investment in the recent months.
Foreign investment on equities in the Dhaka Stock Exchange (DSE) fell for the second consecutive month in August as foreign fund managers preferred to adopt a “wait and see” strategy in the volatile market.
“Foreign fund investors remained watchful over the markets that are going through correction following the rise in the past month,” said Wali Ul Islam, chief executive officer of Lanka Bangla Securities, one of the top brokers. Net investment by foreign investors in the last month stood at Tk1.6bn, down nearly 16% over the previous month, according to the DSE.
“Investors were focusing on a potential warm-up in the political frontier,” said IDLC Investment in its daily market analysis. Profit taking contributed to derailment of the market, it said.
“Broadly speaking, however, the market is likely to focus on political developments and the macroeconomic situation,” said Akter H Sannamat, an analyst and managing director of Union Capital. “Most investors preferred to stay on the sidelines in the run up to the upcoming national election.”