Stocks get a shot in the arm as govt cuts savings tools rates

Stocks at the Dhaka and Chattogram's bourses logged back-to-back positive sessions on Tuesday to partially recover the recent losses.

Unlike the previous session's shaky rise, indices firmly gained on the day as the market got a shot in the arm after the Ministry of Finance announced the rate cuts of the national savings certificates and postal savings schemes now yielding double digit annual returns, said analysts.

Interest rates against the subsidised savings schemes will drop by around 100 basis points if one invests Tk15-30 lakh there, while savers who will invest over Tk30 lakh will only get 9% interests — around 2 percentage points lower than the existing rates.

"The rate cut may motivate savers to invest in the capital market for a higher return," said EBL Securities in its daily market commentary.

The cut will be applicable only for the new certificates to be sold, said the Finance Ministry on Tuesday.

The stock market on Tuesday opened higher and continued the upward momentum up to the end.

"The rates of the savings certificates should be market driven," said Shaheen Iqbal, president of CFA Society Bangladesh, the largest community of Bangladeshi analysts.

Interest payments to the large savers should not be subsidised at all out of taxpayers' money, he said, supporting the slabs.

The subsidised high rates against the government's savings schemes have long been a bane for the financial market in Bangladesh as the risk free highest returns from those hinder the needed fund inflow to the money and the capital market, added Iqbal who is serving Brac Bank as its Head of Treasury and Financial Institutions Division.

DSEX, the broad-based benchmark at the Dhaka Stock Exchange (DSE), gained 52 points or by 0.73% to close at 7,258.57, following Monday's 0.21% gain.

The index on 12 September shot up to 7,336 and corrected up to 7,102 points last week.

As investors' trading activities were mostly centered in the large-cap stocks that charged up indices better alongside increasing the daily turnover at the DSE by 8.37% to register Tk1,910 crore.

Investors' focus on selective stocks helped Blue-chip index DS 30 rise by 0.92% while Shariah-compliant scrips' index DSES outperformed all the indices with 1.07% rise.

Of the sectors, textile, general insurance, pharmaceuticals and chemical dominated the turnover chart with 11-15% contribution each.

As the capital city bourse got 224 gainers against 117 losers and 35 scrips unchanged most of the sectors ended up with some expansion in market capitalisation.

Engineering, Textile and Services were at the top of the green table with 1.6%-1.9% rise in market capitalisation.

On the other hand, the paper and printing, jute and IT sectors suffered some corrections not exceeding 1.2%.

Chittagong Stock Exchange (CSE) also closed the session with its indices up, but turnover slightly down, compared to the previous session.