Investors' wealth erodes over 10% in large-cap

Infographic: TBS

Investors had no capital gain in 2022 from most of the top 15 companies with the largest capital in the Dhaka Stock Exchange (DSE) as their share prices fell by an average of over 10% that year.

However, by investing in small- and medium-cap companies in 2022, investors had several times more capital gains in the short term. Hence, stock market analysts termed it "the year of gambling when small-cap companies ruled".

Two reports on the stock market for 2022 by City Bank Capital Resources and LankaBangla Securities shows that telecom operator Grameenphone was at the top in terms of market capital and dividend payout rate in 2022, but its share price fell by 18%.

On the other hand, the share price of Imam Button, a small capital company, increased by 400%. However, the company has not been giving any dividend to the shareholders for years.

Abu Ahmed, stock market analyst and former economics professor at Dhaka University, told The Business Standard, "Investors have invested more in the shares of small and medium capital companies in the hope of more capital gain or profit in a short time, because the price of these shares can be easily increased by gambling."

"What is more unfortunate is that the margin loan disbursement has increased in these shares. So, 2022 can be called the year of gambling. However, since November last year, prices of these shares have fallen the most and investors have lost the most by investing in them."

"Large cap companies' share prices cannot be manipulated easily, so gamblers do not invest in them. Increasing the price of these shares requires a lot of investment and time. Gamblers do not have that much patience."

He said the investors' capital in the top 15 companies' shares decreased slightly in 2022, but the dividend yields of these companies were very high. With that, investors can overcome the loss, so they should invest in these good companies for the long term.

"Companies with large market capital in our country are also top companies in their respective sectors. Their dividend yield is higher than any other listed company. If more such companies are listed, order and balance will be maintained in the market. Those who do not listen to rumours invest in these companies after seeing the dividend yield. And at the end of the year they are in profit," he said.

Abu Ahmed said, "Despite all the indicators being good, the large capital companies' share prices declined due to the country's economic crisis and a high inflation pressure causing a slowdown in the stock market. However, the capital erosion suffered by the investors in these companies was less than that in smaller companies."

Large companies' returns

The DSE's total market capital is Tk7.60 lakh crore, about 47% of which is held by the top 15 companies. Six of these companies are multinationals.

Among the 15 companies, investors had capital gains only in Beacon Pharma and Marico in 2022. They had a maximum return or capital gain of 18% from Beacon Pharma shares and 5% from Marico shares.

Investors suffered the biggest losses from shares of the state-owned Investment Corporation of Bangladesh (ICB). In 2022, investors of this financial sector company lost 26% of their capital.

Meanwhile, the investors suffered a capital loss of 25% in Brac Bank, 24% in Beximco Pharma, 22% in Beximco, 18% in British American Tobacco, 18% in Grameenphone, 13% in Robi, 9% in LafargeHolcim, 9% in Walton, 4% in United Power, 2% in Berger Paints, 2% in Square Pharma and 1% in Renata shares.

Dividend yield

Grameenphone's dividend yield was the highest – 7.15% – among the top 15 companies with the largest capital. The company paid 250% cash dividend in 2021 and 125% interim cash dividend in the first nine months of 2022.

As the telecom sector regulator banned the sale of Grameenphone's SIM last year, the number of its customers decreased, but still the company's business grew. The ban has been lifted this year.

In terms of dividend yield, United Power was in the second position with 6.84% dividend. The power sector company paid 170% cash dividend to shareholders for FY22. However, the company saw a decline in profits due to the increase in the price of fuel and the dollar.

Following Grameenphone and United Power, Square Pharma announced 4.61% dividend, British American Tobacco 4.33%, LafargeHolcim 3.52%, Marico 3.4%, Beximco Ltd 2.31%, Walton 2.29%, Berger 2.28%, Beximco Pharma 2.26%, Robi 1.45%, Brac Bank 1.36%, ICB 1.08%, Renata 1.04% and Beacon Pharma 0.62%.

According to market insiders, Grameenphone's dividend yield was higher as its share price was lower than its dividend payout. And because the share price of others was high, their dividend yields appeared low even though the dividend payout was high.

Among the top large-cap companies, electronics product maker Walton performed worst. The company posted a loss in the first quarter of FY23 due to the rise in the value of the dollar and the increase in the cost of raw materials.

Apart from this, ICB's profits have collapsed due to the downturn in the stock market. Besides, the profits of Robi, Renata, Beacon Pharma, Brac Bank, Beximco Ltd and Beximco Pharma declined.

However, despite the country's economic uncertainty and high inflation, profits of Berger Paints and British American Tobacco have increased.