Why the stock market is falling 

At the beginning of the third bearish week, major stock indices hit an eight-week low on Sunday with turnover on the Dhaka Stock Exchange (DSE), shrinking to a nine-week low of Tk788 crore. 

Over the second half of the session, investors were found to be rushing to sell off all stock they held.

At the end of the day, only 17 of the DSE scrips closed in the green territory against a decline of 119 while 223 remained unchanged, mostly due to the floor prices that do not allow any trade below the respective levels.

Shocking to many on the street, it was an upside-down picture of the market the same investors were chasing a month ago.

DSEX, the broad-based index of the premier bourse, fell 4.97% from its 20 September swing peak to wipe out nearly half of the gains in the previous seven weeks.

Experts, however, are not surprised at all. 

"The fall was not unexpected to me," said Abu Ahmed, a former professor of economics at the University of Dhaka.

The market was not doing well even before the recent selloff, he said adding that the upturn of August-September was based on much controversial regulatory steroids – the price floor, free rides on a very few stocks allegedly manipulated by market cartels, while a large number of fundamentally strong companies' stocks were finding no buyers at the floor.

The global economy is heading for a recession, the local economy is weakening, interest rates are rising, inflation-hurt people are spending their savings away, the money market is getting tighter every day, and sharply rising costs are biting on corporate earnings except for that of a few strong firms, the professor added.

At such a point, one can cautiously bet on the strongest companies' shares at best while the market players picked low-cap and weaker firms for rallies, and when the cartel members booked their profits, the sharp fall is found to be inevitable, said Professor Abu Ahmed. 

The stocks that rose sharply in the last leg of the market rally are suffering a big selloff leaving the average trend-chasers in trouble.

Shirajul Alam, a retail investor, said 285 of the 396 DSE scrips were stuck on the floor on Sunday while the recently trendy stocks caused significant capital erosion over the last two weeks.

DSE Brokers' Association President Richard D Rozario told The Business Standard that when the stock market was struggling with the confidence crisis and macroeconomic headwinds the Bangladesh Securities and Exchange Commission (BSEC), earlier this month, suddenly came up to stop the brokerage industry practice to accept bank cheque and allow clients purchase stocks instantly. 

It eroded some instant purchasing power of investors as they have to wait for one or two days after issuing a cheque, said the brokerage community leader, adding that his association requested the regulator to restore the good faith practice. 

An analyst at a brokerage research team said, "More importantly, it panicked investors who interpreted the regulatory stance as cautionary or punishing, much in contrast to the BSEC's recent face as an advocate for a bull market." 

He himself was cautiously observing the macroeconomic updates and the stock market since the Ukraine war broke in February this year as the war is hitting almost every single corner of the global economy. 

Optimistic investors who were wishing for ease in the global situation, and a continuation of the local economy's resilience they observed during the pandemic are cautious or even fearful nowadays as they look at declining foreign currency reserves, falling exports, soaring inflation hurting consumption, and businesses. 

The government's recent unforeseen honest acknowledgement of the tough time for the economy, and food security is also hurting stock investors' confidence nowadays, said the analyst seeking anonymity. 

Professor Abu Ahmed said the floor price is not allowing stock prices to adjust with reality and that is reducing the market's resilience.