- DSEX lost over 27% over five consecutive quarters
- It rebounds with a staggering 24.4% gain over July-Sept quarter
- Bangladesh stocks top the table of global returns
- Investors turning to the market with increased participation
- CSE also enjoying nearly 50% more trading compared to previous year
The post-shutdown recovery in the stock market resulted from the policy supports and confidence building measures makes the central bank expect the capital market to become vibrant soon.
"With the positive policy support, we have currently been witnessing some recovery in the stock market, giving hope for a spirited capital market," the Bangladesh Bank said in its September review on the capital market.
Losing over 27% over five consecutive quarters, Dhaka's broad-based stock index (DSEX) has rebounded with a staggering 24.4% gain over the July-September quarter.
The biggest quarterly rally in a decade helped Bangladesh stocks top the table of global returns. In the third quarter of 2020, average returns for global emerging or frontier markets were between 7% and 9%.
Thanks to the monetary easing by the central bank, confidence building measures by the securities regulator and also better than expected economic pace during the pandemic which attracted stock investors at a cheap price level.
Bangladesh is one of the very few economies expecting positive GDP growth during the pandemic, while the country is catching up with its mighty peers like India in terms of per capita income.
As investors are turning to the market, both the bourses of Bangladesh witnessed an increased participation of them compared to the previous months and also to the same period a year ago.
According to the September edition of "Capital Market Development in Bangladesh", the monthly turnover at the Dhaka Stock Exchange (DSE) in September was 20% higher than that in August and more than 2.5 times higher than that in the same month last year.
The port-city bourse Chittagong Stock Exchange (CSE) is also enjoying a nearly 50% more trading volume compared to that a year ago.
Meanwhile, the recovery has made stocks more expensive than the valuation level three months ago. At the end of June this year, the average price to earnings ratio at the DSE hit its long-term bottom around 10, which crossed 13.5 at the end of September.
Also, the average dividend yield at the premier bourse came down to 3.61%, which went above 5% during the extreme fall in March.
Cautious investors look for low price to earnings ratio and high dividend yield to make sure that they are not overpaying for stocks.
The central bank cited the supportive measures it introduced this year to help the then ailing capital market through increased money flow, which also includes special arrangement for commercial banks to invest in stocks.
The banking and securities regulators appear to work together for building a capital market that would attract both debt and equity capital for economic development.
Analysts have also been thanking the central bank for significantly reducing the policy rates alongside increasing the fund supply into the money market for helping the economy revive and the markets take a shot in the arms.
However, Bangladesh stocks are facing a mild correction since the second half of September. DSEX closed at 4,872 on Thursday, which went up above 5,100 in Mid-September.