Fresh freefall creates emergency in stock market

Investors and stakeholders began to panic when the stock market nosedived this week.

While investors hoped for a turnaround, the free-fall over the first two trading sessions dragged the key market average to the lowest level since September 1, 2016.

The fresh bleeding in the market prompted the securities regulator to hold an emergency meeting with the finance minister and his secretary on Monday afternoon to discuss a Tk10,000 crore soft loan scheme for market intermediaries.

The BSEC spokesperson confirmed that the closed-door meeting between the Bangladesh Securities and Exchange Commission (BSEC) and the ministry had been fruitful.  

The board of directors of the Dhaka Stock Exchange (DSE) also met and have decided to seek appointments with Finance Minister AHM Mustafa Kamal and Bangladesh Bank Governor Fazle Kabir.

Market till Monday

Over the last three consecutive trading sessions, DSEX, the key market index at the capital city bourse, lost 167 points.

The index had ended a moderate down week with a 0.7 percent fall on Thursday. But on Sunday, the fall extended to 1.6 percent, followed by a 1.4 percent fall on Monday.

Investor participation has also gradually declined. Trading at the DSE came down to Tk275 crore on Monday. Daily trading went above Tk500 crore during consolidation above the 4,700 mark throughout November.

Following a near 14 percent fall over 2018, the DSEX dropped a further 15.8 percent from January 1 to December 9 this year.

Year to date fall in the blue-chip index DS30 stood at 17 percent.

A continuous fall in prices has already pushed Bangladeshi equities to being considered the cheapest in the world. The average price to earnings ratio of listed companies is below 12 now, and below 16 in case of the top 10 market cap companies.

Why did the sell-off return?

DSEX, the broad-based index at the premier bourse had been consolidating above 4,700 for weeks.

Investors were looking for a turnaround that might offset a part of the fall since February, and help investors close the year decently.   

Even last month, many listed companies with sound fundamentals, as well as many with moderate fundamentals, at a good bargain were attracting investment analysts.

Meanwhile, attempts at fresh fund injection through market support schemes had also increased investors' optimism.

But investors have become skeptical because of negative export growth over the four consecutive months, financial sector worries, sluggish private sector investment, statistics of unemployed graduates and fear of a real economic slowdown.

That triggered the fall this week, said analysts.

An analyst serving one of the largest brokerage firms told The Business Standard that amid perceived risk of currency devaluation in coming days, foreign portfolio investors are still selling shares.

He named Square Pharmaceuticals Ltd, a top market-cap company among the sell-off list.

"The largest pharmaceutical firm of the country lost more than 8 percent market capital in December mainly because of investment withdrawal, not because of its investment worthiness. These large cap companies have a huge impact on the index movement," the market analyst added.

Some floor traders said that sell pressure from margin loan accounts also added to the pressure on indices.