Photo : Collected
A crisis of confidence and apprehensions of forced sales have instilled fears among investors, leading to a significant drop in prices during the first working day of the week, March 18, in the capital market. On this day, at the country's primary capital market, the Dhaka Stock Exchange (DSE), shares of 330 companies experienced declines compared to only 34 companies that saw gains from their closing prices. Investors witnessed a decrease in the market capitalization of 82.33 percent of the traded shares. In a continuation of the previous week's downward trend, investors incurred losses amounting to Tk 49,000 crore over the span of six days.
A market analysis shows that prices have fallen in 20 out of the last 23 working days. The market is now at the bottom due to the ongoing decline in capital.
Those concerned say that after the withdrawal of the floor price, there has been an upsurge in the capital market due to the support of institutional investors. However, the stock market has been hemorrhaging for the past month as individual investors as well as institutional investors tend to take profits.
Four factors are contributing to the market decline. Firstly, forced sales resulting from margin loan pressures from brokerage houses and merchant banks. Secondly, rumors circulating regarding conflict between BSEC and DSE are affecting investor sentiment. Thirdly, rising interest rates on treasury bonds and bank deposits are drawing investors away from the capital market, as the returns from bank and bond investments are currently higher than those from the capital market. Lastly, the influx of new companies listing through initial public offerings (IPOs) this year has led to profit-taking behaviors, as investors sell their shares at higher prices post-listing.
Bangladesh Securities and Exchange Commission (BSEC) Executive Director and Spokesperson Mohammad Rezaul Karim has acknowledged the price drop. He told The Daily Messenger, there will be ups and downs in the capital market. However, the market has been falling continuously for quite some time. A crisis of confidence among investors is evident in this fall, and the prices of good stocks are falling.
He said, due to the fall, the market has now reached the bottom line or bottom. Now when the market is up, the good share price will rise and the market will turn around quickly.
The Executive Director of BSEC commented that investors should be patient and invest in good stocks.
Former President of Bangladesh Merchant Bankers Association (BMBA) Saidru Rahman said that investors are selling shares with the tendency to give away profits without any logical reason. Due to this, there is a rise in the morning but there is a big fall at the end of the day.
According to Al-Amin, a capital market analyst and associate professor at Dhaka University, the capital market is currently experiencing an unprecedented situation caused by the forced sale of institutional investors. He noted that the market's negativity has reached a point where it is unable to withstand the sales pressure, estimated to be around 400-500 crores.
Additionally, Al-Amin highlighted the ongoing trend of new IPOs entering the market, alongside rising interest rates on treasury bills and bank deposits. These factors, he explained, are contributing to the decline in market prices.
Kawsar Al Mamun, the Chief Executive Officer (CEO) of First Capital Securities, has remarked that the current stability in the dollar price and the overall stability in the government and political situation should typically have a positive impact on the market. However, Mamun expressed concerns regarding a group's conspiratorial activities that are contributing to the market's decline. He suggested that the DSE and BSEC should identify and take action against entities responsible for such activities.
Mamun further explained that following the removal of the floor price from the market, institutional investors initially purchased shares and provided support for a brief period. However, he noted that a subset of these investors has now begun to capitalize on profits, leading to a temporary decline in prices. Additionally, Mamun pointed out that other institutions are also selling shares, particularly due to forced sales resulting from margin loan pressures. As a result, the stock market is experiencing a downturn.
Messenger/Disha
