DSE registers 14.03pc year on year growth

The prime index of the Dhaka Stock Exchange (DSE) registered a 14.03 per cent year-on-year growth in the outgoing year compared to previous year despite favourable economic factors and political stability.

"The country's stock market passed a relatively stable year in 2014 compared to the last three years since the market debacle in early 2011 though it could not achieve the expected results," said Akter H Sannamat, managing director of Union Capital.
Different efforts were taken to shore up the market in the past three years, but the market is yet to reach the expected level, said Mr Sannamat.
Analysts believe investors would keenly follow the political developments in 2015. This factor will remain a major market mover in the New Year, they said.
"Having passed yet another gloomy year, the country's stock investors welcome the New Year today (Thursday) with a bleak prospect of turnaround amid worry of political volatility," said an analyst.
The market was stable in the first half of the year while the last half was a struggle between bulls and bears as it tried to find a direction, eventually ending in positive territory.
DSEX, the prime index of the Dhaka Stock Exchange (DSE) -- the main gauge of the market - opened the year at 4,266.55 points and closed at 4,864.96 points Tuesday, the last trading day of the year, gaining 598.41 points or 14.03 per cent over the year, according to statistics from DSE.
The blue chip index DS30 and Shariah compliant DSES also returned 23 per cent and 22 per cent respectively during the year.
The daily turnover, the most important indicator of the market, stood at Tk 4.99 billion on average, up 24.75 per cent year-on-year, according DSE statistics.
"Though turnover rose slightly, it is remained low as investor confidence yet to be restored completely," said Mr Sannamat, also vice president of Bangladesh Merchant Bankers' Association (BMBA).
The market capitalisation rose 23.09 per cent to Tk 3,259.24 billion end of the year compared to previous year while DSE market capitalisation to GDP was 24.12 against 25.51 in 2013.
AB Mirza Azizul Islam, former finance adviser to the caretaker government said, "It is a below expected performance for the stock market in 2014".
"The key index of the Dhaka Stock Exchange (DSE) remained below 5,000-mark despite listing of 17 new companies in 2014 and turnover also did not reach a satisfactory level".
"Investors' confidence is yet to be restored fully as institutional investors along with big ones remained mostly inactive," said Mr Islam, also former chairman of the Bangladesh Securities and Exchange Commission (BSEC).
"The wounds the investors suffered in the market crash of early 2011 are yet to be healed. This is reflected in the lower turnovers and flat growth of indices," said Mr Islam.
The market will not be stabile fully unless the institutional investors, merchant banks and asset management companies put in joint efforts, he said.
"The prospect in the New Year depends mostly on the country's political situation as well as country's real sectors' performance," said Mr Islam.
A total of 17 new securities raised Tk 10 billion from public through IPO, including premium of Tk 5.50 billion in 2014. With inclusion of the new securities, 547 companies are now trading on the DSE.
But, most of new companies were low-cap, and some even provided false financial data in their prospectuses, which raised questions about the quality of the IPOs.
Mr Islam suggested the regulator become more cautious before giving IPO approval for the betterment of the market as well as investors.
"Too many IPOs and the banks' readjustment of their stock market exposure for the year is leading to a fall in its potential," said Mr Sannamat. "There was too much supply, while the demand was lukewarm," he added.
He stressed the need for creating demand of good shares and arranging awareness programmes for potential investors across the country.
The institutional investors are behaving just like retailers, he said.
"For a healthy and long-term sustainable and vibrant capital market, all stakeholders, policy makers and regulators should work jointly," Mr Sannamat added.
Nine listed companies raised Tk 19.80 billion, including premium, in the outgoing year from the stock market through 775.31 million rights shares. Of them, the state-owned Investment Corporation of Bangladesh (ICB) raised Tk 10.55 billion alone.
The achievement of 'A' category has upgraded the status of the bourses to an international level, which also paved the way for attracting more foreign investors in the upcoming months, said an analyst.
Net foreign investment in stocks saw a 34.3 per cent growth in 2014 compared to previous year, which indicates that the capital market is being viewed as a viable place for investment.
"Improved regulatory framework and oversight, positive macro variables, relative market valuation level and reduced systematic risk from political front were the cheering factors for foreign investors," said Md Ashaduzaman Riadh, Strategic Portfolio Manager of LankaBangla Securities.
Mr Sannamat, however, said too much dependency on foreign investment in Bangladesh stock is not the sign of a healthy market. "If foreign investors put sale pressure at a time, the market will may face a big trouble," he added.
The overall price earnings ratio of the DSE stood at 17.77 in the just concluded calendar year against 17.17 in 2013, the DSE data showed.
One of the main focuses of the securities regulator was strengthening the enforcement activities. In line with this, the regulator took actions against the issuer companies, the issue managers and the auditors for their wrongdoings.
A new trading system, replacing the 16-year-old one, was introduced toward the end of the year, opening a window for a paradigm shift and has enhanced efficiency, transparency and technological integration.
"The surveillance and development of the market is a continuous process and the regulator will maintain it in the coming years too, so that the investors get back their confidence in the market," said a BSEC official.
The BSEC will also prepare a long-term guideline on IPOs and a national policy on financial literacy, and establish a separate clearing corporation.
Searching for strategic partners for demutualised stock exchanges, to bring state-owned entities including big companies in stocks market are still a major challenge.
"Though index and turnover volatility declined, market was still showing cyclical one way direction which was main deterring factor for investors to make long term commitment to stocks," said Mr Riadh.
"Qualitative development of investors in decision making was very poor from local side which was further worsened by the phantom corporate reporting by listed companies," said Mr Riadh.
"I think one-way direction of market will continue in 2015 with sudden rise or fall of exuberance and investors will focus more on market timing," said Mr Riadh.
Politics is the biggest systematic risk that could have a negative impact on both market sentiment and corporate profitability. Otherwise, declining commodity prices in international markets and big ticket infrastructure spending will boost consumption and benefit corporate profitably in 2015, Mr Riadh added.
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