Price floor helps stocks withstand fuel shock

Stock investors appeared bold on Sunday as the sharpest ever rise in diesel-petrol prices barely impacted the indices of Dhaka-Chattogram bourses.

Thanks to the price floor that assured investors of less risk of capital erosion compared to the expected capital gains from a wide range of trendy shares.  

Analysts feared a recent 42.5% and 51.6% hike in diesel and petrol prices respectively would add to the ongoing inflation pressure, and increase costs for businesses.

On Sunday's opening session, the market plunged but buyers took only five minutes to come up and push the market higher.

DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), soared to the intraday peak of 6,336 in 15 minutes, from the day's bottom of 6,279.    

The rest of the day was a narrow range volatility story as the bulls and bears continuously kept confronting each other, while sectoral individual scrip switching was observed till the end, said stockbrokers.

Finally, DSEX closed 0.13% lower at 6,304, while Shariah index DSES closed 0.12% higher at 1,376, compared to the previous session.

However, the blue-chip index DS30 closed 0.25% lower at 2,259.

The investors were active on both sides of the trading fence while the sellers dominated the market as uncertainties loomed, riding on the fear of surging living and production costs, along with other concurrent macroeconomic issues that somewhat faded the reinstated investors' optimism brought up by the recent favourable regulatory actions, EBL Securities wrote in its daily market commentary.

"Beating our fear, the market performed much better today," said a brokerage official at Motijheel, Dhaka.

"The existence of floor price mechanism has been providing support to the market and taming the panic-driven sales across the bourse," EBL Securities added.

Since the price floor's activation the previous Sunday, DSEX recovered more than 340 points from its 14-month low of 5,963, as the market suffered a selloff over June and July due to macroeconomic concerns.

However, the cooling down of global oil prices and higher remittance inflow together offered investors a breathing space that turned into optimism after the return of the price floor while the central bank adopted a cost-basis method for banks' capital market exposure calculation instead of mark-to-market method.

The securities regulator's meetings with diversified groups of investors to encourage them also helped increase market participation.

Turnover in the DSE inched down by 6.1% to Tk1,117 crore on Sunday.

Textile, pharmaceuticals, and miscellaneous sectors led the turnover contribution table in the DSE, while travel, cement, and food sectors led the return table. General insurance, ceramic, and life insurance faced the highest corrections.

Out of the 382 issues traded, 124 advanced, 187 declined, and 71 remained unchanged in the DSE.

Indices in the Chittagong Stock Exchange slightly inched down on Sunday.