Energy austerity creates panic in the stock market

Investors, already cautious about the recent declines in stocks, were panic-driven on Monday after the government announced measures to restrain power and energy as a safeguard against the global macroeconomic turbulence.

Trading on both the bourses opened with a bearish consensus amid multiple negative factors hurting investors' confidence and the indices kept falling till the closing.

Nowadays, as no scrip can fall by more than 2% in a day, only a handful of stocks had buyers to bid, while over 265 of the 382 scrips on the Dhaka Stock Exchange (DSE) closed at their lowest allowable prices.

DSEX, the broad-based index of the premier bourse, fell by 1.39% to 6,217, while the blue-chip index DS30 also suffered a similar fall and the Shariah index DSES fell by 1.2%.

Investors were swinging between fear about the macroeconomic challenges and some optimism till last week, said stockbrokers.

But, the unfolding energy crisis, declining foreign currency reserve and further depreciation of the Taka against the US dollar, along with the drop in fresh apparel export orders altogether worsened the market sentiment, they added.

The government on Monday announced several measures — including switching off the diesel-based power plants, pre-scheduling power outages, shortening office hours, holding all office meetings online, switching off air-conditioners in religious establishments, a day off for petrol pumps every week, and no shopping after 8.00 pm — to save power and energy.

Investors associated the announced austerity with that in Sri Lanka in recent months, where depleted foreign currency reserves created a humanitarian condition across the South Asian island state.

Besides, the updates on continuous pressure on foreign reserves and the US dollar appreciating to over Tk100 created panic among investors.

Also, the gradually unfolding stories of stock market manipulation by a government employee before the regulators' eyes for the last two years and his amassing of an unbelievable fortune disheartened fair investors who were already losing confidence in the market, said the stockbrokers.   

However, amid a lack of interested buyers, selling became virtually impossible for most of the stocks on Monday and that reduced the DSE daily turnover by 13.2% to Tk515 crore, which was nearly a two-month low.

Textile, pharmaceuticals, and life insurance sectors contributed the most to the daily turnover, while no sector managed to avert shrinkage in market capitalisation.