Market support pills fail, DSEX hits 10-month low 

The announcements to equip the Investment Corporation of Bangladesh (ICB) with funds for market support did not work as investors finally surrendered to the ongoing panic again.

DSEX, defying the last-hour turnaround signals on Tuesday, again nosedived on Wednesday and closed at 6,309 – the lowest since 18 July 2021.

Stockbrokers and analysts said investors are in a fear of further capital erosion virtually amid no good news on the macroeconomic front, be it the global situation or local exchange-rate turbulence, while corporate earnings outlook also turned negative.

No hope for a turnaround is enough to stop their fear of further losses, said a top brokerage executive while discussing investors' sentiment.

The US dollar in the kerb market had hit Tk105 on Tuesday before it slightly cooled down to below Tk100 on Wednesday, while the Bangladesh Bank's official rate was Tk87.5 only.

DSEX on Monday dropped by 2% as investors feared a potential selling pressure from the ICB following news reports that the de-facto market maker was under a sudden pressure to immediately repay around Tk700 crore to its lenders whose loans to the ICB violated the central bank's ceiling.

Consulting with the Bangladesh Securities and Exchange Commission (BSEC), ICB formally wrote to its major credit line providers to renew the deposits for another one-year term, and also requested a Tk500 crore deposit from the Dhaka Stock Exchange (DSE).

The BSEC, earlier this week, also announced that the Capital Market Stabilization Fund (CMSF) would hand over a further Tk50 crore to the ICB for market support.

However, investors barely gave an ear as they had been finding the market simply heading down following some short-lived rallies.

In the last six trading sessions alone, the DSEX lost 389 points while the total market capitalisation in the premier bourse shrunk by Tk27,295 crore.

Who sells more now

Due to the deteriorating exchange rate, foreign investors have long been in a selling mode in the bourses of Dhaka and Chattogram.

Following a meeting in March, after the Ukraine war began, to ignite the latest round of fire in the global macro-economy, local market intermediary industries promised in a meeting with the regulator that they would remain net positive investors in stocks following a contrarian investment approach.

Stock dealers, asset managers and merchant banks of the industries kept their promises and in May their net investment increased by several hundred crores of taka, said BSEC Executive Director and spokesperson Rezaul Karim.

"It is individual investors who are leading the selloff," he told The Business Standard.

"We found two groups creating the panic among the mass investors – some social media users and several brokerage executives whose job is to execute buy-sell orders, but they unofficially work as investment managers of many of their clients for a hidden profit sharing," said Karim, who leads the regulator's market surveillance activities. 

The acts are a violation of the securities law and the regulator is seriously thinking of strict actions that are hurting the market, he added.

On the other hand, several brokerage professionals expressed their dissatisfaction with the regulator which has been continuously interrupting the market, especially by tactfully or forcefully stopping selling securities, while it should let the market run free amid ensured compliances and governance.

The BSEC on Wednesday instructed both the bourses to stop the long-overlooked practice of using dummy accounts to trade for foreign clients who invest in the local stock market with the help of their local custodian banks or foreign brokerage counterparts.

Daily turnover on the DSE slightly declined to TK763 crore on Wednesday, from Tk780 in the previous session.