Stocks jump 3.7% on further liquidity drive

It seems investors have been flocking to the stock market to buy shares, which has helped the market see over a Tk900-crore transaction after more than a year.

As a result, DSEX, the benchmark index of the Dhaka Stock Exchange, rose 3.71 percent to close the day at 4,734 points.

But analysts questioned: Will this buoyancy continue or will it fade away like it did several times in the last few years?

"Some recent steps taken by the government might have encouraged investors – both individual and institutional – to pour their money into the market," said a senior official of a merchant bank.

"Also, the prices of many shares were very lucrative for purchase," he added.

The government decision to halve the interest rate against postal savings schemes within 6 percent has played an important role to this end. Investors believe the reduced return in the popular savings instrument will drive more money into stocks in the future.

The boost comes on top of a recent formula by the Bangladesh Bank to equip each commercial bank with an opportunity to put up to Tk200 crore into the capital market until February 2025.

This new investment, to be made through their own portfolios and that of other market intermediaries who will borrow from the special fund, will be excluded from banks' regular market exposure.

Sunday witnessed the key appetite for stocks among retail investors, who jumped to grab some shares at any cost.

Meanwhile, buy orders from institutional portfolios have had a disciplined growth instead of sharp spikes, said floor traders.

The Business Standard spoke to some top equity research teams who expressed their cautious optimism on the market scenario.

"It has been a liquidity driven rally till now. We are facing the same qualitative problems within the banking sector and no significant improvement is apparent in the fundamental front," said a research team member who is also a Chartered Financial Analyst.

He added that they are cautiously analysing phenomena such as the possible impact of interest rate capping on both the banks' profitability and on the economy, government borrowing and private sector credit growth, government's move for deposition of idle money in state entities, and more importantly, external events that may impact the economy and corporate profitability.

"It is too early to comment on the points. We are observing banks' appetites for putting new money into stocks based on the Bangladesh Bank outline," the expert said seeking anonymity.

He grossly agrees to the undervalued situation discourse, but is interested to focus on fundamentally sound shares and stay away from short term hypes.

"We are mindful that any sudden overheating results in correction," another market analyst at a different brokerage firm explained his view on the sustainability of the current rally. He prefers to see market movements in gradual phases.

The blue-chip index DS30 increased 3.62 percent while the Shariah Index DSES lagged behind with a 2.86 percent daily hike.

The premier bourse recorded a turnover of Tk916.26 crore. Daily turnover crossed Tk900 crore for the first time since February 14 last year.

Meanwhile, despite above average activities, the Chittagong Stock Exchange saw a slump in trading on Sunday because of a big spike in the previous session. All the indices at the port city bourse gained more than 3 percent on Sunday.

No sectors lost market capital on Sunday and banking stocks gained the maximum at 5.73 percent, followed by IT, textile, service and real estate, engineering and pharmaceuticals.

Telecom, paper and printing, and jute were at the bottom of the sector-wise gain list – still with over a 1 percent rise.