Is the proverbial wolf in?

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Shamsul Huq Zahid
Nobody cried wolf, openly. Yet those who watched the developments in the country's stock market closely for the past few months knew the wolf was coming. The proverbial wolf, it seems, has already sneaked into the market unnoticed.
The benchmark index of the country's prime bourse, the Dhaka Stock Exchange (DSE) lost nearly 135 points in just four days' of trading, ending Monday last, triggering panic among small investors.
However, except for offloading of shares by some foreign portfolio investors, the erosion in stock prices has nothing to with the ongoing global financial meltdown, considered the worst since the Great Depression of the 1930s.
Purely domestic factors are pulling down the market that soared, riding more on rumours than on fundamentals of the listed issues.
However, there was an attempt by some quarters to halt the erosion and push the benchmark up last Tuesday following a street protest staged by a small group of investors (?) the day before. But the fact remains that those who operate in the market knew that there would be a 'turnaround'-no matter, how temporary it is--of stock prices after the 'street protest'. This has become rather a tradition in Dhaka stock market. The question is: will it be successful in boosting the sapping confidence of the small investors?
That the Tuesday's market 'turnaround' was stage-managed is very much evident from the day's total turnover. The total turnover on the day was only Tk 2.11 billion, the second lowest in past few months, as against the average daily turnover of nearly Tk. 4.0 billion of the last couple of months. Was there any valid reason for the index to go up by more than 80 points Tuesday when the demand from the investors was low? It could be that some institutional investors played the dominant role on the day, leading to a hike in the index.
But where have all the investors gone? It does appear that there has been some outflow of funds from the market in the past few weeks. Market insiders tend to believe that a part of the substantial amount of funds held by a section of very influential investors, who entered the market after the 1/11 and played a dominant role in the stock price movement, has gone out of the market.
Besides, a large chunk of unaccounted for or tainted money had flowed into the stock market, which is considered a safe heaven for such funds, following the anti-graft drive by the incumbent caretaker government. The holders of such funds were otherwise confident of the Anti-corruption Commission or the National Board of Revenue not entering the stock market for any investigation because of its very sensitive nature and also that being more or less in line with the situation in other developing countries. A part of such funds is believed to have now flowed out of the market.
The outflow of tainted money and funds of the influential quarters from the market, it seems, is connected with the relaxation of emergency rules and the coming general election. However, reasons for withdrawal of funds by the two sections of investors might be altogether different.
The situation has, allegedly, worsened by a section of merchant banks. These banks have advised their clients to sell off stocks as the market might slip further. However, the merchant banks have denied the allegation.
Meanwhile, alarmed by the latest selling pressure, the DSE chief executive officer last Monday through a press briefing advised the investors not to go for panic-selling as the ' country's economic indicators' were in ' good health'. He also put forward the old plea, "please invest in securities having strong fundamentals".
How can healthy economic indicators help the investors who are bent upon committing hara-kiri? None can save those investors, who being purely guided by rumours, buy a Z-category share having a face value of Tk 100 at Tk 14000 or more while ignoring highly under-priced stocks of a good number of banking institutions with strong fundamentals. Moreover, activities of banks are better regulated and monitored than other listed issues.
There is no denying that many investors do not follow the very principles of investment in stock market. They are, actually, guided by herd-instinct and rumours which are aplenty in stock market these days.
Going by the recent developments in the stock market, one might feel tempted to know about the role of the capital market regulator. Actually, it talks no evil, sees no evil and does no evil. As the capital market watchdog, it has tended to reverse its decisions (margin rules, for example) when a tiny group of investors organises brief protests in front of the DSE building located in the business district of Motijheel.