Stocks tumble as bank issues keep falling

Dhaka,  Fri,  18 August 2017
Published : 19 May 2017, 21:41:02 | Updated : 19 May 2017, 22:52:17
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Weekly analysis

Stocks tumble as bank issues keep falling

Average daily turnover dips 16pc on DSE; budget, Ramadan keep investors watchful
Stocks tumble as bank issues keep falling
Babul Barman


Dhaka stocks extended their losing spell last week that ended Thursday as worried investors continued cashing in on stocks to safeguard their position ahead of national budget declaration.

Market operators said the news reports on rising classified loans, concern over amendment to Bank Company Act 1991 and its impact on the banking sector, coupled with upcoming policy changes and economic outlook in next budget kept most of the investors inactive - thereby taking the key index further below 5,400-mark.

"The cautious investors were busy cashing in on stocks to safeguard their position while sale pressure from the issues of banks, non-bank financial institutions (NBFI), cement, power and telecom sectors dragged down indices," said an analyst at a leading brokerage firm.

He also said historical trend has shown that investors, prior to a budget announcement, prefer to book profit to avoid unforeseen negative impact of the new budget.

Finance Minister AMA Muhith is scheduled to place the national budget for the fiscal year (FY) 2017-2018 on June 1.

LankaBangla Securities, a stockbroker, said, "The index has been falling steadily from the beginning of this month - losing 145 points since May 03".

The falling trend is continuing from the previous month. Since the start of April, key index has lost 320 points, it said.

"Also, capital market tends to lack momentum during Ramadan days and preceding budget announcements, both of which are coming up," said the stockbroker.

The week witnessed five trading sessions as usual. Of those, four sessions fell while one managed to edge higher.

Week-on-week, the DSEX, prime index of the Dhaka Stock Exchange (DSE), came down to more than three months' low and settled at 5,399.60, losing 96.55 points or 1.76 per cent.

City Bank Capital Resources, a merchant bank, said, "The correction was triggered by the news items like rising classified loans and move to amend Bank Companies Act 1991 that created a negative impact on investors' mind".

The two other indices also closed lower. The DS30 index, comprising the blue-chips, fell sharply by 32.16 points or 1.59 per cent to close at 1991.80. The DSE Shariah Index also lost 18.22 points or 1.43 per cent to close at 1,255.17.

The port city bourse, Chittagong Stock Exchange (CSE), also finished lower with its Selective Categories Index, CSCX, plunging by 194 points or 1.88 per cent to settle at 10,124.

The total DSE turnover for the week stood at Tk 29.71 billion, registering an increase of 4.92 per cent over the previous week's Tk 28.31 billion, as last week saw five trading sessions instead of previous week's four.

However, the daily turnover stood at an average of Tk 5.94 billion, which was 16 per cent lower than the previous week's average of Tk 7.07 billion.

Textile sector emerged as the week's turnover leader, capturing 16 per cent of the week's total turnover value, followed by engineering 14 per cent and banks 13 per cent.

International Leasing Securities, a stockbroker, said, "Indecisiveness and lack of confidence among the investors created choppy trading throughout the week".

The stockbroker noted that the risk-averse investors continued their sell offs to avoid further loss while some adopted 'wait-and-see' approach ahead of budget announcement and holy Ramadan.

"Bank stocks continued to fall amid concern over amendment of the Bank Companies Act 1991 and its impact on the banking sector while upcoming national budget and holy month of Ramadan kept most of the investors watchful," said the stockbroker.

"Recent gloomy situation of the market adversely affected the turnover which lessened the total market activities by 16 per cent than that of the preceding week," said the stockbroker.

Out of the 331 issues traded, 202 closed lower, 103 closed higher and 26 remained unchanged on the DSE trading floor.

The total market capitalisation of the DSE also fell 1.33 per cent last week as it was Tk 3,675 billion on the opening day of the week and came down to Tk 3,624 billion on closing day of the week.

IFAD Autos topped the week's turnover chart with about 12.03 million shares of Tk 1.62 billion changing hands, closely followed by Doreen Power Tk 1.20 billion, Paramount Textile Tk 946 million, LankaBangla Finance Tk 852 million and Ratanpur Steel Tk 801 million.

Northern Jute Manufacturing was the week's highest gainer, posting a 25 per cent rise while Fareast Finance was the worst loser - slumping by 26 per cent.

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