Dhaka stocks continued to drop in the past week, stretching the losses to the second week, due to investors’ concerns over the impact of the global coronavirus (COVID-19) outbreak on the country’s economy and the Bangladesh Bank’s order to cut the lending rate.
DSEX, the key index of the Dhaka Stock Exchange, slumped by 2.14 per cent, or 95.75 points, to close at 4,384.48 points on the last trading session in the past week on Thursday, after losing 252.92 points in the week before.
Before the two-week loss, the DSEX gained 280 points in two weeks following the BB directive that allowed banks to set up special funds for investing in the market.
In line with the previous week, the index started the past week with a negative trend on Sunday, extending the losses to the seventh session amid concerns over the BB’s order for the banks to cut the interest rate to a single digit, market operators said.
The market gained in the next two sessions as some institutional investors went for bargain hunting purchases following media reports that said that a number of banks, including Sonali Bank and Rupali Bank, had initiated move to form the special funds, they said.
The BB on February 10 allowed each bank to borrow up to Tk 200 crore from the central bank on easy terms to invest in the capital market.
The index fell in the last two sessions of the week due mainly to concerns about the country’s economy following the continuous spread of the coronavirus in different countries, they said.
The investors feared that the coronavirus epidemic in China as well as the United States, Italy and Spain might disrupt export and import activities in Bangladesh.
Bangladesh is one of the countries which are most exposed to Chinese supply disruptions amid the epidemic.
Media reports said that the United States and China had expressed concerns over Bangladesh, stating that it was at high risk of being exposed to the virus.
With the virus spreading out all over the world, including neighbouring India, the possibility of the virus infiltrating to Bangladesh has increased.
EBL Securities in its weekly market commentary said, ‘Global macroeconomic slow down due to supply chain disruption caused heavy damage in our domestic trade activities, excusing further erosion of local business activities the investors’ panic-driven selloffs were predominant throughout the week.’
In addition, the central bank on February 24 issued a circular, putting a cap on the interest rate for all loans, except credit cards, at 9 per cent with effect from April 1.
Market analysts said that the lending rate cut would substantially reduce profits of the banks which would not be able to declare expected dividends for their shareholders.
The investors worried that depositors would be reluctant to keep money in the banking system which will eventually affect the banks’ revenues.
Adding to these worries, the Bangladesh Energy Regulatory Commission on February 27 raised the average retail prices of electricity by 5.3 per cent with effect from March 1 that might affect the manufacturing sector.
Among the large capitalised companies, share prices of Grameenphone, Square Pharmaceuticals and United Power Generation Company dropped over the week.
Average share prices of the textile sector dropped by 4.9 per cent, telecommunication 3.9 per cent, energy 3.3 per cent, non-bank financial institutions by 1.5 per cent and banks by 1.1 per cent.
Therefore, the daily average turnover, an indicator of the investors’ participation on the trading floor, dropped to Tk 482.15 crore last week compared with that of Tk 617.5 crore in the week before.
Out of the total 358 shares traded in the past week, 237 declined, 97 advanced and 24 remained unchanged.
DS30, the blue-chip index of the DSE, dropped by 2.02 per cent, or 30.13 points, and closed at 1,462.25 points.
Shariah index of the bourse DSES shed 2.72 per cent, or 28.97 points, in the past week to close at 1,015.93 points.
VFS Thread Dyeing led the turnover chart with shares worth Tk 61 crore traded last week.
FAR Chemical Industries, Square Pharmaceuticals, LafargeHolcim Bangladesh, Orion Infusions, Orion Pharmaceuticals, Central Pharmaceuticals, Silva Pharmaceuticals, Indo-Bangla Pharmaceuticals and Grameenphone were the other leaders in the turnover chart.
Central Pharmaceuticals performed the best last week with an increase in share prices of 21 per cent while Industrial Leasing and Financial Services fared the worst, shedding 25.10 per cent in prices. (Source: New Age)