Sell-offs continue as investor sentiment takes hit from policy rate hike

Stocks extended the losing streak for the second straight week to Thursday following continued sell-offs as investor sentiment took a major hit from the central bank's latest policy rate hike.
Analysts said the already bearish market exaggerated the imposition of US visa restrictions while the market faced another blow as the central bank hiked the policy rate to tame inflation.
The Bangladesh Bank on Wednesday raised its key policy rate, also known as the repo rate, by 75 basis points to 7.25 per cent which is the highest in a decade.
A day later, interest on bank loans rises to 10.70 per cent as the central bank approves lending-rate hike by 50 basis points as part of a belt-tightening measure for reining the runaway inflation.
The central bank's latest steps make funds costlier, which would lead to a shift in money flow from the stock market to banks as many investors are likely to invest in fixed-income deposits rather than in the stock market, according to market analysts.
While the prevailing floor price discourages investors from putting fresh bets, the higher policy rate will slow down the money flow to the stock market, said a stockbroker, declining to be named.
"Higher interest rates are generally a negative factor for the stock market as funds moved from stock market to banks due to safer investment options," he said.
Besides, the cautious investors preferred to liquidate their holdings and stay on the sidelines owing to shaky confidence stemming from intensifying macroeconomic concerns and rising political tensions.
This week featured five trading days. Of them, the three sessions suffered losses while two closed marginally higher.
DSEX, the broad index of Dhaka Stocks Exchange (DSE), finally settled the week 22.91 points or 0.36 per cent lower at 6,261.72. The DSEX shed more than 48 points in the past two straight weeks.
Two other indices also closed lower. The DS30 Index, which consists of blue-chip companies, dropped 2.70 points to close at 2,137 and the DSES index, which represents Shariah-based companies, fell 3.79 points to 1,356.
The recent rise in the policy rate by 75 basis points amid a tightened monetary space fuelled the prevailing concerns among investors regarding the market outlook, commented EBL Securities, in its weekly market analysis.
However, opportunistic investors took positions on sector-specific lucrative issues to secure some quick gains surrounding the earnings disclosure for the FY23. Conversely, investors' participation in the market inched up.
The total turnover of the week stood at Tk 23.36 billion, up from Tk 18.14 billion in the week before, as this week saw five trading days instead of previous week's four days.
The average daily turnover stood at Tk 4.67 billion in the outgoing week, which was 3 per cent higher than the previous week's average of Tk 4.53 billion.
Investors were mostly active in the general insurance sector, capturing 28 per cent of the week's total turnover, followed by food (14 per cent) and miscellaneous (8 per cent).
Most of the traded stocks saw price erosion. Of 362 issues traded, 120 witnessed price fall and 37 saw price surge while 205 issues remained unchanged on the DSE trading floor.
Small-cap companies kept their dominance on the turnover chart, with Sonali Paper & Board Mills being the most-traded stocks with shares worth Tk 1.09 billion changing hands, followed by LafargeHolcim, Sea Pearl beach Resorts, Fu-Wang Food and Republic Insurance.
Deshbandhu Polymer was the week's top gainer, rising 32.40 per cent as the company reported 26 per cent higher annual profit to Tk 36.21 million for FY23 while Emerald Oil Industries was the worst loser, shedding 18.80 per cent.
Most of the sectors saw price fall with general insurance losing 3.90 per cent, followed by paper & printing, service & real estate and life insurance.
The Chittagong Stock Exchange (CSE) also ended lower with the CSE All Share Price Index (CASPI) losing 48 points to settle at 18,532 and the Selective Categories Index (CSCX) shedding 29 points to 11,079.
The port city's bourse traded 15.98 million shares and mutual fund units with turnover value worth Tk 667 million.

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