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Bangladesh - December 24, 2022

Decisions neither inspired confidence

2022: A distress year for Stock Market

Industry Desk: The year 2022, the stock market passed in discomfort even after the resolution of the exposure limit issue, the formation of funds with undistributed dividends and the issuance of floor prices for the benefit of investors.
According to the data of Dhaka Stock Exchange (DSE), the main index of the exchange ‘DSE X’ increased by 97 points on the first working day of January this year (January 2). On January 11, after only eight working days, the main price crossed 7 thousand points. The next day it fell slightly to 6 thousand points, but a day later it settled at 7 thousand 17 points. On January 30, the index fell below seven thousand. From February 2 to February 16, “DSE X” stayed at 7 thousand.
The news of Russia’s invasion of Ukraine on February 24 caused panic in the Bangladesh stock market. Share selling pressure increases in DSE. Investors sold 28.26 million shares in one day. Shares of more than three hundred companies fell. As a result, the main index of DSE lost 109.23 points in one day on February 24. On the next working day (February 27) there was a bigger fall in the stock market. On that day 25 crore 69 lakh shares were sold in DSE. Shares of more than 96 percent of the companies participating in the trades fell. ‘DSE X’ lost 163 points.
The stock market, which raised hopes in January, suddenly turned upside down. At the end of February, the war panic began.
Capitalizing on investors’ panic, various rumors are spread in the stock market. As a result, the main index of DSEX lost 272.53 points on two working days February 24 and 27. 10 days fall out of 22 working days in March. Among them, the main index of DSE lost 182.12 points on March 7. Of the 379 companies that participated in the trade on that day, the share prices of 364 companies fell. The stock market fell on 10 days out of 19 working days in April, 11 days out of 18 working days in May, and 10 days out of 21 working days in June.
In July, the main index of Dhaka Stock Exchange fell on 14 working days out of 19 working days of July. Out of this, DSE fell for 9 consecutive working days from July 12. The prices of hundreds of companies are falling every day. ‘DSE X’ comes to the house of 5 thousand on July 28. Bangladesh Securities and Exchange Commission (BSEC) re-issued the floor price in the stock market on July 28 to prevent the continuous fall in prices. The floor price is determined as the average of the five-day closing prices of all securities.
According to BSEC’s July 28 order, from July 31, the price of securities can rise above the fixed floor price at a normal rate. However, it cannot go below the floor price. On account of bonus shares or right shares of a company, the price of the securities in the floor price will be adjusted. In case of shares of newly listed company, the closing price of the first day of trading shall be the floor price of that share. Also, if a company pays a bonus dividend, the new floor price will be determined by adjusting the share price on the day before the record date.
There was some relief in the stock market after setting the lowest price for the shares. The big jump in the index was on the next working day (July 31) after the floor price was issued. Of the 382 companies that participated in the trades, 362 shares rose. The index added 153.45 points. And the market capitalization increased by Tk 21 thousand crores in the first week of the floor price issue. The stock market was up for 15 days out of 20 working days in August. In the meantime, the market fell due to rumors of lifting the floor price. The BSEC said that action will be taken against the rumor brokers and that the ‘floor price will remain in place’.
In September, the trend of index jumps continues to decline. DSE fell on 10 out of 20 working days during the month. As the prices of most of the companies remained unchanged, the share market started feeling uneasy again. 11 working days in October and 10 working days in November. DSE has fallen by 8 business days so far in December. In this, the last five days of continuous decline have created great discomfort among the market participants.
In the current year, a total of 104 days, trades have crossed the threshold of thousands of crores of takas. Out of this, the trades crossed 2 thousand crore takas in just 5 days. The highest transaction so far in the year was last September 20. Shares and units worth Tk 2,832 crore were traded on DSE that day. During the rest of the working day, the transaction did not reach thousands of crores of takas. The last 28 working days have continued to be unsettled. Out of this, 18 working days saw transactions below Tk 500 crore. Market people say that although there is no liquidity crisis, the market has slowed down due to the floor price. Institutional investors are not investing.
Capital market analyst Professor Abu Ahmed said that the stock market was good until July. After the floor price was issued, the market started to deteriorate. Investors are unable to sell their shares. As a result, they are not able to buy new shares. Now many investors have stopped going to brokerage houses.
He said, in any country in the world, the share price is not fixed. Given in Bangladesh. The economy of almost all countries is deteriorating due to the Ukraine-Russian war. If the economy is bad, it will also affect the stock market. So why should the share price be determined? If the money flow in the market increases, the index will increase. But the money flow has decreased, artificially inflating the index.
The Bangladesh Securities and Exchange Commission (BSEC) refuses to accept that institutional investors are not investing because of the floor price. Spokesperson of the organization Rezaul Karim said that the year of merchant banks, brokerage houses and other institutions ended in December. Institutional investors are making very few investment decisions now due to year-ends. Hopefully, they (institutional investors) will come back to invest from January. Then we can see a positive impact on market trades and indices.

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