Stocks end lower as bank shares tumble

Dhaka,  Sat,  27 May 2017
Published : 12 May 2017, 21:37:12
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Weekly analysis

Stocks end lower as bank shares tumble

Stocks end lower as bank shares tumble
Babul Barman


Stocks finished lower last week that ended Thursday as risk-averse investors encashed  throughout the week to safeguard their position, fearing further fall.

Brokers said market finished lower as investors were selling shares mostly from banks and non-bank financial institutions to avoid further loss, dragging the market down.

"Bank shares kept falling amid concern over the cabinet approval of a drafted bill for amending Bank Companies Act 1991 and its impact over the banking sector while many investors are waiting for the policy changes and economic outlook in next fiscal year (FY)," said an analyst at a leading brokerage firm.

Finance Minister AMA Muhith is scheduled to place the national budget for the upcoming FY 2017-18 on June 1.

"Historical trend has shown that before a budget announcement, investors prefer to book profit to avoid unforeseen negative impact of new budget," said LankaBangla Securities, a stockbroker, in its weekly market analysis.

The stockbroker noted that already there has been some negative news related to new budget like value added tax (VAT), which may have triggered investors to book profit before the release of new budget. This could be the reason for such drop in index last week.

The week witnessed four trading sessions instead of five as market remained closed Wednesday due to public holiday on the occasion of Buddha Purnima. All the four trading sessions closed in the red.

Week-on-week, DSEX, the prime index of the Dhaka Stock Exchange (DSE), dipped below the 5,500-mark and settled at 5,496, losing 44.50 points or 0.80 per cent.

City Bank Capital Resources, a merchant bank, said, "The correction was triggered by the few news like approval of draft bill for amending Bank Companies Act 1991 and net overseas investment at DSE declined by 78 per cent that created a negative impact on investors' mind".

The two other indices also finished marginally lower. The DS30 index, comprising blue chips, fell 9.76 points or 0.48 per cent to close at 2,024. The DSE Shariah Index also lost 1.69 points or 0.13 per cent to close at 1,273.

The port city bourse, Chittagong Stock Exchange (CSE), also closed lower with its Selective Categories Index, CSCX, losing 97 points or 0.93 per cent to settle at 10,318.

The total turnover for the week stood at Tk 28.31 billion against Tk 28.41 billion the week before with block trade contributed 3.50 per cent to the total weekly turnover.

The daily turnover averaged at Tk 7.07 billion, which was 0.37 per cent lower than the previous week's average of Tk 7.10 billion.

The non-bank financial institutions sector emerged as the week's turnover leader, capturing 18 per cent of the week's total turnover value, closely followed by fuel and power 15 per cent and bank 14 per cent.

International Leasing Securities, a stockbroker, said, "Indecisiveness and lack of confidence among the investors created choppy trading during the week. The risk-averse investors continued their sell offs to avoid further loss".

The stockbroker noted that selling of shares mostly from bank, financial institution and telecom sectors contributed to the fall in indices in the week.

"Falling of net investment in stocks by overseas investors in April was eight month low. This profit booking by the overseas investors prompted the local investors to liquidate their holdings," said the stockbroker.

Most of the major sector faced erosion. The bank sector faced the highest correction of 2.62 per cent, followed by non-bank financial institutions 1.45 per cent, telecommunication 0.82 per cent, fuel and power 0.58 per cent and food and allied 0.36 per cent.

The engineering and pharmaceuticals managed to close green, advancing 0.46 per cent and 0.36 per cent respectively.

Out of 331 issues traded, 158 closed lower, 131 closed higher and 28 remained unchanged on the DSE trading floor.

The total market capitalisation of the DSE also fell 0.55 per cent last week as it was Tk 3,745 billion on the opening day of the week, while it came down to Tk 3,724 billion on closing day of the week.

Doreen Power Generations and Systems dominated the week's turnover chart with about 11.80 million shares of Tk 1.52 billion changing hands, followed by LankaBangla Finance Tk 947 million, United Power Tk 687 million, Argon Denims Tk 686 million and Shahjibazar Power Company Tk 574 million.

Central Insurance Company was the week's biggest gainer, posting a 22 per cent gain, while Midas Financing was the worst loser, slumping by 14 per cent following its no dividend declaration news.

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