Stocks witness recovery efforts after four weeks’ fall

Stocks are in a recovery phase as the major indices added points in the fifth week, thanks to the finance minister's effort that helped to gain investors' confidence.

DSEX, the broad index at the Dhaka Stock Exchange, over the week's trading has gained 112 points to close at 4,968, a 2.32 percent weekly gain with average daily turnover at the premier bourse which increased 3.2 percent to reach Tk390 crore.

DS30, the blue-chip index at Dhaka gained 1.9 percent over the week and closed at 1,769, while Shariah-compliant securities index, DSES, has increased 2.25 percent and closed at 1148. 

All the indices at the Chittagong Stock Exchange increased over 2 percent over the week. Against 189 gainers, 89 scrips lost prices this week while the prices of 26 remained unchanged. 

The improved sentiment 

Over the previous four weeks, the key stock index of the country lost 380 points and analysts blamed the reduction of fund flow into stocks, poor performance of a large number of newly listed companies, and lack of confidence among investors caused by the disputes between the government and Grameenphone over audit claims of Tk12,880 crore. 

Last week the finance minister met all the capital market stakeholders and relevant regulators to figure out what the capital market needed to get a strong footing.

Within one week, he also intervened to solve the Grameenphone issue amicably, and finally, the disputed amount is believed to be halved. 

Bangladesh Bank also responded to the capital market crisis and offered a low-cost fund to commercial banks to invest in stocks. However, experts believe it is not enough as the fund is offered for a short term of six months only. 

However, the market this week has welcomed the positive attempts and has enjoyed the recovery. 

"I am not quite optimistic about the numbers calculated by our research team about how much fund may flow into the stock market as a result of the measures taken," said a top stock broker seeking anonymity. 

"But it is an important addition to boost investor confidence that is helping the ongoing recovery," he added.

All sectors but energy, life insurance, tannery, and paper saw the green

Among the major sectors, ceramics has gained 7.9 percent of market capital, followed by telecom with 7.1 percent gain, banks 2.6 percent, non-banking financial institutions 2.4 percent, pharmaceuticals 2.1 percent, engineering 1.9 percent, cement 0.9 percent, IT 0.5 percent and textile with a 0.5 percent capital gain were in the green zone; whereas fuel and power stocks faced a 0.7 percent price fall.

Broad market indicators at the weekend 

According to research done by the City Bank Capital Resources Ltd, one of the leading investment banks, currently, the market is trading at a price level 13.8 times higher than listed companies, trailing earnings per share that is the average of the last four quarterly earnings per share.

Securities other than life insurance stocks are priced 1.7 times higher than their net asset value per share or unit.

The listed equities on average offer 12.1 percent trailing earnings against shareholders' equity expressed as return on equity (trailing). 

The average earnings yield is 7.3 percent, that means listed securities are generating net profit after tax of Tk7.3 against their market capital of Tk100 each.

From the earnings, companies and listed mutual funds are giving cash dividends to their shareholders that equate to 3.2 percent of their market capital. 

Free float shares at the market now stand at 39 percent, that means the shares are ready to sell without prior mandatory disclosure.