Increased portfolio investment, policy aid help revitalise stock market

Some factors, including rise in portfolio investment and the government's policy supports, have given an impetus to the country's capital market in the recent times, experts and stakeholders said.
Besides, gradual cut in bank deposit rates, some large transactions in block board, brokers' marketing for fresh funds, and many investors' attitude to keep connected with the upward trend also played a role to boost the market turnover and indices.
Experts also see a positive growth in the recent market movement, except the 'abnormal' price hike observed in case of some junk shares.
Dr. A B Mirza Azizul Islam, a former chairman of the securities regulator, termed the market's recent trend positive, as there is no major fluctuation in the movements of indices and turnover.
Mr. Islam, however, termed the 'abnormal' price hike of some junk shares unexpected, as those shares belong to 'Z' category due to their weak fundamentals.
Of the 47 'Z' category companies, the shares 10 companies' witnessed price hikes ranging 38 per cent to 181 per cent during November to December last, despite the fact that some of these companies incurred huge accumulated losses.
On November 1, the Dhaka Stock Exchange (DSE) featured a turnover of above Tk 3.76 billion, which rose to above Tk 6.55 billion on November 22.
On the following day, the turnover jumped to Tk 14.78 billion, of which Tk 8.28 billion came from block transactions, featured by Khulna Power Company Limited (KPCL).
Later, the daily turnover varied between Tk 6.58 billion to Tk 8.64 billion from November 24 to December 7. On December 8, DSE featured a turnover of above Tk 11.49 billion.  
Afterwards, the turnover was above Tk 10 billion for eight sessions. The market closed with a turnover of above Tk 14.48 billion on January 2, above Tk 13.91 billion on January 3, above Tk 12.09 billion on December 4 and above Tk 12.45 billion on December 5.
Along with the rising trend in turnover, the broad index DSEX also rose and crossed the 5,000-point mark on December 27. The index gained by about 166 points in the next seven sessions in a row and closed above 5,182 points on Thursday.
"The first reason behind the investors' regained confidence is the rise in  portfolio investment. The second reason is injection of fresh funds following the lower bank deposit rates," said Mr Islam.
The overseas investors purchased shares worth Tk 50.57 billion, while they sold stocks worth Tk 37.16 billion in 2016, and their net investment stood at Tk 13.41 billion in the calendar year against Tk 3.86 billion in 2015.
Md. Sayedur Rahman, president of Bangladesh Merchant Bankers Association (BMBA), said the government's policy supports to adjust the banks' over exposure in the capital market, and rise in portfolio investment helped the market witness more participation from general investors.
"Portfolio investors are prudent. They apply utmost professionalism in injecting funds in any market. So, the rise in foreign portfolios is a
positive indicator for the country's capital market."
Mr Rahman also said macro indicators are also positive for the capital market. Many investors also developed a tendency to keep in touch of the market's positive movement.
Md. Moniruzzaman, managing director of IDLC Investments, also echoed the same expression with the BMBA president.
Apart from foreign portfolio investments, some large transactions were executed in block board, which upgraded the market situation and drew the investors' attention afresh towards it.  
"Some investors started to look at the market afresh following the rise in DSE turnover to Tk 14.78 billion on November 23," said a top official of a leading brokerage firm.
The block board also enhanced the market turnover in some other sessions in November.
In the recent times, the investors' presence has also increased manifold in different brokerage firms compared to a few months ago.
Some leading brokerage firms are enhancing their in-house turnover by conducting marketing for injection of fresh funds.
 "The banks are providing interests up to 6.0 per cent against deposits, whereas the dividend yields of many listed companies are around 10 per cent. We're inspiring our clients saying that investment in many shares is more profitable than bank deposits," said Mohammad Ali, chief operating officer of Dhaka Bank Securities Ltd.
Mr Ali said their firm is now experiencing daily transaction of around Tk 250 million against Tk 50 million of six months back.
Following the Bangladesh Bank's policy support, the scheduled banks' exposure to the capital market has come down below 25 per cent of their respective capitals.
"The banks' overall exposure has come down to 19 per cent, creating a scope of fresh investments for them in the market. In November and December, investments of some banks rose," said an official of the central bank.   
The banks' capital market investment limit was set at 25 per cent of their total capital, comprising paid-up capital, reserve, retained earnings and share premium, as per the new Bank Companies Act.
According to BMBA, investment scopes of many banks may rise further, if their reserves and retain earnings increase in the audited financial statements for 2016.
Many general investors said the market seems to have regained life after five years.
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