Inflation worries drag down stocks again

Stocks slumped again for the third consecutive session on Wednesday as investors, worried about rising inflation and devaluation of the taka against the dollar, traded cautiously.

DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), dropped 1.24% to below 6,180 points – the sharpest fall since 31 July when the market introduced the price floor mechanism.  

The DS30 blue-chip index dropped 1.19% to 2,210.

"Equity indices continued their downward trend for the third consecutive day as investors were unnerved by the recent surge in fuel prices that exacerbated the ongoing macroeconomic tensions," wrote EBL Securities in its daily market commentary.

The sharpest ever jump in fuel prices on Friday is putting further pressure on the economy, which has already been suffering from high inflation and a depreciating local currency, it added.

This has led to investor concerns about rising living costs and the decreasing bottom lines of listed companies whose capacity utilisation may have already been affected by a disrupted power supply due to a shortage of natural gas.

On top of that, the government's plan to keep factories closed one day a week as an energy austerity measure has weakened investor sentiment as they now fear production and sales losses, and earnings deterioration, said stockbrokers.

Meanwhile, failing all the curb market monitoring drives, the US dollar jumped to a record high of Tk119 on the streets of Motijheel on Wednesday which has further rattled the confidence of stock market investors in the current macroeconomic environment.

The Dhaka bourse saw a significant decline in participation as total turnover went down 26% to Tk790 crore on Wednesday, compared to the previous session.

Textiles, miscellaneous, and engineering stocks contributed to nearly half of the day's turnover in the country's premier bourse.

Travel, services, textiles, and the cement sector suffered the maximum price corrections, while only jute registered some gains.

Of 379 scrips traded on the DSE, only 26 advanced, 279 declined, and 74 remained unchanged.

The port city bourse, the Chittagong Stock Exchange, also settled in the red.