Stocks rebound thru regulatory pushes, bargain-hunting

Stocks rebounded on Tuesday following a two-week fall.

Investors have thanked regulatory pushes to increase institutional fund inflow alongside discouraging aggressive selling practices.

The market opened with the continuation of the previous session's bearish mood, but within half an hour buyers began to appear on the electronic trading screens and over the time purchase orders kept rising, especially in the fundamentally sound stocks assumed to be worth holding regardless of market condition.

DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), secured a 120-point rise from the day's bottom and netted 47 points or a 0.74% hike from the previous close.

Return of the buyers offered a breathing space to investors who were in panic finding no buyer for the majority of stocks at the narrowed down falling range of 2% in the previous session.  

Also, investors' participation increased by more than 20% as the DSE turnover reached Tk600 crore from a year-low level of less than Tk500 crore in recent sessions.

Stockbrokers said institutional buyers triggered the market confidence and individual investors followed suit to take positions in many shares at a low price on Tuesday.

The Bangladesh Securities and Exchange Commission (BSEC) ordered both the country's bourses to collect and submit information on how much brokerage firms have invested in stocks from their dealer accounts and how much they are doing as part of their pledge in a March 30 meeting with the regulator.

Both the DSE and the Chittagong Stock Exchange (CSE) have asked all their brokers for updates and a number of them bought some shares on Tuesday to prove their efforts to help the market rebound, said sources.  

Also, a commercial bank has begun fresh injection of money into fundamentally sound stocks within buying ranges from its Tk200 crore fund.

Brokerage firms would inject Tk1 crore each in the month of Ramadan while the merchant banking industry would help over Tk100 crore fund inflow into stocks, pledged their leaders in the last meeting with BSEC.

Several brokers told The Business Standard on Tuesday that their authorised representatives or traders who execute buy-sell orders were cautious and conservative following the regulatory crackdown on aggressive selling in the market.

The regulator on Monday ordered nine brokerage firms to suspend 15 of their traders for putting big sell orders at market price, mostly at the bottom circuit level, without caring about its market consequence. And, brokerage people had been arguing the decision narrating that such orders were not prohibited.

On Tuesday, the commission asked for an explanation from 15 brokerage firms on why they put pre-opening sell orders at the bottom circuit-level even before the market opened, which might be treated as unlawful and with mal-intent.

However, since the regulatory actions helped arrest the market fall unsophisticated stock investors cheered the outcome that 195 of the DSE scrips advanced on Tuesday against the decline of 132 while 51 remained unchanged.

The CSE also settled in the green terrain.     

Both the DSE and the CSE had been in a bearish trend since Russia invaded Ukraine in late February.

Analysts had also been blaming local interest hikes, rising inflation, and higher global commodity prices that are increasing the cost of both production and consumption, while some observers said lack of governance in the secondary market also was hurting investor confidence.