Weekly Capital Market Insight: Stocks lose momentum during second week of recovery

After a week of recovery, stocks ended up in red territory again amid lower participation from investors.   

The major indices at both the bourses, except the blue-chip index at the Chittagong Stock Exchange (CSE), decreased marginally with a reduction in public market volume.

DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), closed the week at 4,937.8 points – a 0.62 percent decrease compared to the previous week's.

During the first nine months of the year, the index lost 447 points or 8.3 percent.  

In addition to local investors' cautious approach, foreign portfolio investors are also selling stocks at the DSE. September data reveal that foreigners have been net sellers at the bourse for seven months in a row.

They have become conservative because of negative news headlines on deteriorating health of the banking sector and as a caution against perceived exchange rate risk, according to analysts at top brokerage firms.

Deducting the huge block market transactions this week, average trading volume is down from the previous week's.

During the week, total turnover, including the block market transactions at the DSE, stood at Tk1,960 crore ($233.5 million). The average daily turnover was Tk391.77 crore, 0.1 percent higher than the previous week's.

"This indicates that, due to recent volatility in the market, investors' confidence is yet to recover to participate in the market coherently amid government measures to support and boost capital market participants. On the other hand, bargain hunter investors have showed their interest on sector-wise issues to rebalance their portfolio and have opted for a 'wait and see' approach," according to an EBL Securities research.

CSEX, the broad index at the CSE, lost 0.42 percent to close the week at 9,122 points. CSE30, the blue-chip index, closed 0.45 percent higher at 13,122 points.

At the DSE, blue-chip index, DS30, lost 0.77 percent, and Shariah index DSES suffered the most, losing over one percent.

Against gains of 137 scrips at the DSE, 193 lost price and the price of 25 securities remained unchanged. At the port city bourse, 127 gained, while 153 scrips lost price over the week and 27 remained unchanged.
 

Sectoral scenario

Sectors like engineering, pharmaceuticals, general insurance, textile, bank and fuel and power sectors held the position as top contributors in the turnover chart.

Mutual fund topped the sectoral chart to gain market capital over the week, 7.6 percent. The ceramic sector gained 5.2 percent, mainly because of the Standard Ceramic's extreme price hike, while the Information Technology sector gained market capital by 2.6 percent.

On the flip side, the jute sector lost 5.5 percent of its market capital, followed by general insurance and telecom that faced the highest price correction.

Broader market indicators 

According to the City Bank Capital Resources research, currently the market is trading at an average trailing market price earnings ratio of 13.6, calculated based on last four quarters' earnings per share divided by the market price.

The price to book value ratio stood at 1.6, meaning stocks are priced at 1.6 times of their net asset value per share.

The research team excluded life insurance stocks to calculate the figures as these do not publish any earnings per share or net asset value per share.

Their weekly coverage notes to clients also reveal that the listed securities, on an average, are currently offering 12.1 percent return on shareholders' equity annually.  

Earnings yield stood at 7.4 percent on Thursday, meaning listed companies, on an average, are making profits equal to 7.4 percent of their market capital.

Dividend yield stood at 3.3 percent, which indicates that against a market capital of Tk100, investors are receiving Tk3.3 in cash dividend from listed securities.

Free float shares at the stock market stood at 39.3 percent, meaning that the shares are ready for trade without prior regulatory disclosure.