No sellers on board for 22pc of stocks

The stock market is doing the opposite of what it had been doing before the outbreak of the Covid-19 pandemic in the country.

To end the market's devastating fall, the securities regulator put in a restriction on floor prices for individual scrips in March.

Now at the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE), investors can barely find a stock left behind in the race for shares as they rallied rapidly.

DSEX, the broad-based index of the capital city bourse, witnessed a 21.8 percent gain since July 1. This helped the index register a 9.1 percent year-to-date gain as of Sunday.

The rush of investors to grab any stock before it becomes more expensive has pushed the core index up by 3.3 percent on the opening session of the week. 

The DSEX closed at 4,859, the highest points for 2020 till date and the highest since October 13, 2019.

Further, more than 80 of the over 360 tradeable scrips at the DSE had no seller on board at the closing hour. Whatever trades took place were mainly a contribution of aggressive buyers who were bidding at the top of the day's allowable price limit.

A few dozen more shares were trading just beneath the allowable ceiling for the session.

Valuation–the calculation of fair price based on company fundamentals–appeared irrelevant across the floor.

What made the market so optimistic?

"That is an auction market. Each price movement is never linked to fundamentals at the same time point," said Md Shakil Rizvi, managing director of brokerage firm Shakil Rizvi Stocks.

Investors were fleeing the market six months ago as they were pessimistic due to the economic situation, dried-up money flow and the pandemic; on top of everything, he said.

Now investors see the economy is doing just fine, better than everyone had feared. Money flow is increasing and most importantly the new capital market regulators have gained public trust, he added.

"In the first quarter of this year, the market was selling off even all good stocks and the entire market went too low. Now the market is rectifying," said Rizvi, who is also a director of the Dhaka Stock Exchange board.  

Bangladesh Merchant Bankers' Association President Md Sayadur Rahman believes the market is behaving right.

During the last downturn, some stocks were sold off, reducing the price of each of the shares. Most investors are holding their stocks, still with losses, and naturally they will not sell the stocks before they reach the breakeven, especially when they see confidence and liquidity both come back, he told The Business Standard.

"I think demand and supply will see a balance after the index crosses 5,500 points to erode the unrealised losses for majority investors," he added.

Turnover at the DSE crossed Tk1,350 crore, almost 12 percent higher than the previous session.

 Widespread buying spree

The week began with a widespread buying spree in terms of sectors and stock categories. Thanks to the regulatory initiatives to reform poorly performing companies stuck in the Z category at both the bourses.

Against the 3.3 percent gain of the broad-based index, the blue chip index, DS30, gained 2.8 percent and the Shariah-based securities' index, DSES, 1.97 percent, indicating less appetite for selective stocks.

Mutual funds topped the table of market capitalisation gain–8.3 percent–based on the hope a fair price is reflected after the market has turned around.

The financial institutions, banking, textiles, ceramics, fuel and power services, plus general insurance sectors followed mutual funds with their over three percent gain in market capitalisation. 

Indices at the Chittagong Stock Exchange also registered a high gain with investors' increased participation.