DSE leads Asian frontier markets’ rally in May

The Dhaka Stock Exchange (DSE) has been the best performing bourse among the Asian frontier markets in May, according to Asia Frontier Capital. 

DSEX, the broad-based index at Bangladesh's premier bourse, gained more than 9.3% in May, while the key indices in the markets of Pakistan, Vietnam, China, the Philippines, Kazakhstan, Sri Lanka, Thailand, and Indonesia lagged behind with lower gains. 

Over the same month, AFC Asia Frontier Fund, which has an investment in Bangladesh, saw its net asset value going up 3%.   

The DSEX saw the big jump in May as a strong quarterly result and the control of new Covid-19 cases swiftly brought back investor confidence, said analysts at the international investment firm having bases in Hong Kong and the Cayman Islands. 

Of the portfolio companies of AFC Asia Frontier Fund, commercial vehicle assembler Ifad Autos gained 28.1% and Brac Bank 23.9% in May "on the back of very impressive quarterly results in a tough operating environment."

On the other hand, local analysts are concerned about the extra-ordinary rallies, like around a hundred or more percent gains in a month, in the small-cap scrips at both the DSE and Chittagong Stock Exchange (CSE) and many of them believe this is taking place amid excessive speculation and a lack of regulatory supervision. 

The Bangladesh stock market, which historically lacks sufficient depth, has come through two major boom and bust cycles in 1996 and 2010. 

A decade of depressed journey appears to have ended in the middle of 2020 as the extreme market dip then was accompanied by a bold monetary easing by the Bangladesh Bank on top of the better-than-expected outcome in the battle with the pandemic, in terms of both the public health and economic recovery. 

Since the middle of last year, the DSE and the CSE have topped the international return tables twice in 2020, in September and October. 

Also over the second half of 2020, DSEX was at the top of the return table for globally tracked indices. 

However, a fair extent of correction over the initial months this year resulted in a moderate year-to-date rally in the DSEX as the index gained 11% while AFC Asia Frontier Fund and MSCI World Index, a benchmark that tracks shares in 50 countries, also gained the same percentage points. 

Up to the end of May this year, DSEX outperformed its counterparts in Sri Lanka, China, Indonesia, the Philippines and underperformed those in Mongolia, Kazakhstan, Vietnam, Iraq, and Pakistan.