DGEN crosses 6,000-mark as share splitting decision dictates market

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FE Report
Key index of Dhaka stocks surged past 6,000 for the first time Sunday as the hoopla over the regulator's share splitting decision continued to dictate the market despite warnings the hype could lead to a bubble-burst.
The market broke record for the sixth straight session as the benchmark DSE General Index (DGEN) jumped 1.92 per cent or 115 points to 6,096.88 with heavyweight Grameenphone setting the pace.
The new mark means the main market gauge has added 271 points or nearly five per cent since the record-breaking session began last Sunday, after the government allowed conversion of high-valued shares into Tk10 each.
The broader All Shares Price Index (DSI) closed at 5010.25 with a gain of 93.71 points or 1.90 per cent. The DSE 20 index comprising blue chip shares ended at 3371.80, up by 0.40 per cent or 13.57 points.
"The market has continued to grow on splitting decision by the government," said Reaz Islam, managing director of the LR Global Bangladesh.
"There are no fundamental reasons behind the surge. The hype over the share conversion decision is pulling in new investment, making the market increasingly risky," he said.
The Securities and Exchange Commission (SEC) has made repeated warnings that the share splitting decision does not bring any basic change to the stocks' fundamentals, tacitly urging the investors not to join the hoopla.
But the investors have largely ignored the regulator's advice as the splitting decision has made some of the best performing shares affordable and within their reach.
"There are questions over the sustainability of the market," Islam said.
"Even a few days back we saw the bulk of the investment chasing fundamentally strong shares. But now the same thing is happening to poor performing stocks, which is unexpected," he said.
Telecommunications, the highest capped sector in the DSE, led the day, as Grameenphone - the lone listed company in the sector - gained 5.52 per cent to Tk 296.20. It's the third consecutive rise for the market heavyweight.
Banking issues, which gained an astounding 20 per cent in the past fortnight, eased to 0.77 per cent rise, driven by ICB Islamic Bank that rallied 12.48 per cent.
Leasing or non-banking financial institutions (NBFIs) sector climbed 3.46 per cent higher to emerge as top gainer for the second successive sessions.
Among leasing firms, IDLC Finance rose 5.73 per cent, followed by Uttara Finance 5.18 per cent, Prime Finance 3.59 per cent and ICB 4.90 per cent.
General and life insurers continued to gain new ground rising 1.09 per cent and 2.72 per cent respectively on hopes the companies would soon declare rights offer to hike paid-up capital made mandatory in the new insurance laws.
The new laws, enacted in March, have raised paid-up capital of the country's 40 plus general insurance companies and 17 life insurers by at least 300 per cent. The laws will be effective from July.
Pharmaceuticals sector gained 1.39 per cent, fuel and power, the third largest sector in the market, grew 1.15 per cent and cement 2.91 per cent.
Mutual funds declined 0.72 per cent, snapping three sessions of rise.
Trading activities at the bourse continued to be strong as shares worth Tk 20.55 billion were transacted -- a robust increase of more than 14 per cent over the previous session's Tk17.96 billion.
Bulls maintained their dominance over bears as out of 248 issues traded, 160 closed in positive, 81 declined and seven remained unchanged.
Titas Gas was the top turnover leader with shares worth Tk 1.26 billion changing hands. Other turnover leaders were Beximco Ltd, AB Bank, LankaBangla Finance, Social Islami Bank, ACI Formulations, IDLC Finance and Premier Bank.
ACI Formulations was the largest gainer with a rise of 19.02 per cent despite the company has said it sees no reason for the growth.
"We don't have any undisclosed price sensitive information that may play a role in the recent unusual hike of our share values," the company said in response to a DSE query.
Modern Dyeing, Meghna Cement, Delta Spinning, Reliance Insurance, Prime Textile, First Lease International, GQ Ball Pen and Keya Detergent were the other major gainers.
AB Bank and IFIC Bank were the major losers, shedding 15.02 per cent and 13.95 per cent respectively as the two banks went ex-dividend.
The other prominent losers included Ibn Sina, Prime First ICB AMCL Mutual Fund, Pragati Insurance, Mercantile Bank, Samata Leather, Aziz Pipes and BATBC.