Despite continuous efforts by the government, the stock market went into free fall on Monday, as major indices fell over one percent during each trading session for the third consecutive day.
DSEX, the key index of the Dhaka Stock Exchange (DSE), lost 281.65 points in the past fifteen days, and 1,212.78 points in the last nine months – over 20 percent fall from the post-election market peak in January.
During the last week of January, the DSEX had reached near the 6,000 mark, but has been falling since then.
A year-to-date basis counting also suggests that the index is 12.5 percent down from where it closed on December 31 last year.
No policy support enough
Over a dozen analysts from top investment and brokerage firms in Bangladesh told The Business Standard that confidence on the market is virtually non-existent at this point, so different classes of investors are wary about investing more money in stocks.
In the last few months, the government took various measures to boost market confidence, but none of them panned out as of Monday.
Most recently, in September, the Bangladesh Bank offered commercial banks a low-cost fund – for six months – to invest in stocks. Three weeks since that offer, only one bank has opted to use it so far.
The number of banks applying for such funds could have reached over two dozen, according to analysts. But, that did not happen because banks do not want to risk entering the market for a short period of six months only.
State-owned Investment Corporation of Bangladesh (ICB) had also been given funds to boost the market.
While addressing a meeting with the leaders of DSE Brokers Association of Bangladesh (DBA) on Monday evening, ICB Managing Director Md Abul Hossain said, "Injection of the fund helped indices go up, but as the fund is exhausted, the market has fallen even further.
"We cannot overcome the situation without wider, bolder, and of course, responsible participation from different types of investors," he concluded.
The ICB has also sought a Tk1,000 crore emergency fund from the central bank for market support, and its managing director expects to get it.
The de-facto market maker also received Tk200 crore from state-owned Sonali Bank Ltd on Monday, as a subscription to the ICB's previously floated market support bond.
"ICB will invest the entire amount in listed stocks soon," Abul Hossain told the DBA.
Institutional investors still optimistic
Everyone is praying for a year-closing with at least tolerable losses in stocks, which is going to be crucial for the balance sheets of institutional investors, and their profit and loss statements this year.
Over half of the analysts hope that this is going to be the scenario at the end of the year.
During the Monday meeting with DBA, Ahsan Uddin, the head of Research at ICB, presented his analysis on market direction.
"This is a point of maximum pessimism in the market, and historically, a turnaround comes about in such phases, if we analyse things based on market principals like Elliott Wave or the Dow theory," he explained.
DBA President Shakil Rizvi also expressed optimism about the market, as the average price to earnings (PE) ratio is at around 12, and historically, the DSE had bottomed out at such a valuation level before.
The market on Monday
The DSEX lost 1.06 percent to close at 4,711 points on Monday – hitting almost a three-year low.
Speaking to The Business Standard, floor traders said that following the decline during the two previous sessions, some investors tried to increase buy orders as a part of their bargain hunting strategy.
This led to some ups and downs within a decent range until 12:00 noon. However, the second half of the trading session was totally dominated by forced selling, according to brokerage sources.
Market analysts and experts blamed the lack of confidence among investors for the ongoing market sell-off.
Stock brokers are lawfully allowed to sell off securities held by their clients which have been bought with money borrowed from stock brokers, if the value of the clients' investment portfolios falls below an acceptable level.
In the second half of the session, the market nosedived.
DSES, the Shariah index of the premier bourse, lost over 1.5 percent, while blue-chip index DS30 was also went down by one percent.
Against a gain of 80 scrips at the DSE, 231 securities lost price and that of 41 remained unchanged.
In the last 15 days, the DSE lost Tk23,406 crore of its market capital. Turnover at the exchange stood at Tk299 crore, a 0.57 percent increase from the previous day.
At the Chittagong Stock Exchange, most of the indices managed to limit their daily losses below one percent. Turnover was Tk13.2 crore there, down from the previous trading day.
The benchmark index at the port city bourse, CSCX, lost 491.52 points in the last fifteen days.
All major sectors closed negative at the end of the session.