Investors lose Tk17,000 crore in day of corona nervousness

Dhaka stocks plunged 279 points or 6.5 percent on Monday ­­— the biggest ever single-day fall since the country's premier bourse launched its new key index in January 2013.

Consequently, investors lost over Tk17,000 crore of their capital on the day. The cumulative sum of loss soared to over Tk45,000 crore in the last three weeks. 

The wipeout shows that Bangladesh has not been immune to the virus related nervousness that is roiling the financial market around the globe.

Stocks on both the Dhaka and the Chattogram bourses were in a free fall on Monday as over two-thirds of scrips had no buyer in most of the moments on the session. 

Eventually, the market closed with only two gainers and 352 losers at the Dhaka Stock Exchange (DSE). 

DSEX, the key benchmark on the premier stock exchange fell by 6.5 percent following a 2.17 percent fall in the previous session. 

The float-adjusted broad-based index of the DSE had suffered the last fall that was bigger than this one on January 29, 2012. In that session, the then bear market saw DGEN — the then broad-based index — going down 6.8 percent. 

Coronavirus appeared as a double whammy for the capital market, which has already been suffering from the negative outlook of the economy, the banking sector and corporate profitability, said a trader at a top brokerage firm. 

Meanwhile, a top merchant banker said, "Some people may try to take advantage of the intensifying concern over the coronavirus and pull the market down to buy stocks at risk-free prices."

Rakibur Rahman, a director of Dhaka Stock Exchange, came down heavily on the banks' directors and management for their lax attitude towards the stock market.

"Each bank has been allowed to invest Tk200 crore in the stock market, but they look least interested," Rahman told The Business Standard.

With minority shares, directors think banks as their own property and they donate funds from profits depriving shareholders, he said.   

Earlier, stock indices on the local bourses had lost more than one-fourth in 2019 over 2018.

In the first half of January this year, mainly because of the government's attempts to cap interest rates, the DSEX had come down to 4,036. It later rebounded up to 4,800 level base on the back of the central bank's extra-ordinary policy to allow banks to invest more in stocks. 

But the economic outlook and shaky market confidence made more than 90 percent of banks to refrain from opting into the opportunity offered by the Bangladesh Bank. 

A combination of market reversal and panic selling on Monday pushed the DSEX below the recent low, which closed at 4,008 – lowest since May 5, 2015. 

A top executive at a brokerage firm informed The Business Standard that a large number of investors came up with sell orders on Monday as a part of their risk minimisation strategy. Forced selling from margin accounts also added to the selling pressure. 

The day was one of the worst days in years in terms of forceful selling of securities from accounts where investors borrowed money to buy additional stocks for more profit. 

The coronavirus outbreak across continents is dangerous for the economy because it is severely disrupting the supply chain, escalating costs and reducing consumption to trigger a slowdown in both manufacturing and service sectors, according to experts.