Stocks spiral down, participation lowest in a year

Stock indices extended their losing streak for the third consecutive day amid a complex situation where buyers' caution drastically reduced the daily trading turnover to a one-year low.

DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), closed 0.48% lower at 6,662 points on Wednesday.

Daily turnover at the premier bourse again has come down to below Tk500 crore, near to the one-year low, and the dull market is mostly a result of the regulatory disruptions through the narrowed lower circuit breaker aimed to arrest sharp falls.

Also, a slightly shortened trading hour for the month of Ramadan contributed to the low turnover.

As no scrip is allowed to lose more than 2% of their price a day now against the untouched top circuit of up to 10%, daily price falls may look moderate but the majority of scrips have been in a downward spiral for weeks, said stockbrokers.

The market is silently bleeding every day, capital erosion is the only outcome for the average investors who gave an ear to the news regarding regulatory moves to increase institutional investors' participation in the month of Ramadan, said Rokon, a retail investor who trades from a Motijheel area brokerage firm.

None of his 8-9 stocks survived the market downturn and he already lost more than 20% of his capital since the Ukraine war began in late February.

Mahmood Osman Imam, Professor of finance at the University of Dhaka, is not surprised at all.

"Nothing is favouring the stock market now," said the expert.

He observed that the money market is running out of idle funds as the real economy is using much more money to pay the higher bills for everything, and that is why private sector credit growth, call money rate – everything went up recently.

Besides, the expensive commodities have added to the costs of production and consumption and are consequently hurting the corporate earnings outlook, he added.

In the given context, investors are behaving cautiously in the market – both the retail and institutional ones.

Retail investors, mostly driven by herding behaviour, are worried about the lack of immediate gains and the incurring losses, while the institutional investors are also suffering from a lack of confidence.

Besides, the macroeconomic situation of South Asian nations, the risk of exchange volatility is not helping Bangladesh attract enough foreign portfolio investments right now.

Dr Imam did observe, like several equity analysts, that the price fall has created opportunities for investors to grab some good stocks at a cheaper price but the market is not getting the stocks trendy enough, mostly because of the nature of the investors' base dominated by herds.

The market in its adverse time is hurting short term gain seekers and prudent investors should plan for a longer period to hold fundamentally sound stocks when found in the buying range, Osman Imam said.

On Wednesday, out of the 385 issues traded, 44 advanced, 293 declined, and 48 remained unchanged at the DSE.

The port city bourse, Chittagong Stock Exchange, also settled in the red terrain. Trading turnover increased to over Tk22 crore from Tk12 crore there.