Stocks down to 2-month low on gas price hike, higher bond returns

Stocks tumbled on Sunday, hitting two-month low, as investors adversely reacted to the announcement of an abrupt gas price hike for captive power plants and industries.
The Bangladesh Energy Regulatory Commission (BERC) hiked the gas price by 33 per cent for new captive power plants and businesses. The announcement happened to be during the trading hours.
The gas price for new companies has been fixed at Tk 40 per cubic meter, up from the earlier Tk 30 per cubic meter, and for captive power plants at Tk 42 per cubic meter, increased from the previous Tk 31.50 per cubic meter.
The decision is to take effect immediately.
The additional price will negatively impact the manufacturing sector, squeezing the profitability of the listed companies, market insiders say.
Moreover, the rising yield of Treasury bonds in the last one month turned investors' focus to the risk-free investment vehicle from the equity market.
The yield of 91-day T-bills has gone as high as 11.45 per cent from 11.24 per cent in the week to Sunday, while 182-day T-bills' return jumped to 11.75 per cent from 11.45 per cent in the period.
Generally, the market tends to weaken when interest rates of bonds rise as funds are diverted to the money market from the stock market.
On Sunday, the market opened lower and went downhill further until the end of the session with no sign of reversal despite a three-month suspension of additional US tariffs on most countries, including Bangladesh.
The DSEX, the prime index of the Dhaka Stock Exchange (DSE), finally slid almost 36 points or 0.68 per cent to settle at 5,169, the lowest since February 9 this year.
Price fall of selective stocks, such as Islami Bank, Prime Bank, Beximco Pharma, BRAC Bank and United Commercial Bank, dragged the prime index down. They jointly caused a 21-point fall of the index.
The blue-chip DS30 index, a group of 30 prominent companies, shed 16 points to 1,912 while the DSES index, which represents Shariah-based companies, lost 7 points to 1,166.
"Stocks tumbled due to dominant sell-offs, primarily in stocks from the manufacturing sector, as investors reacted negatively to gas price hike," said EBL Securities.
Moreover, the price correction in the heavyweight banking sector, along with post-dividend adjustment of particular bank stocks, further pushed the market down, said the stockbroker.
Market participation remained sluggish, as turnover on the prime bourse fell to Tk 4.14 billion, 23 per cent down from the day before.
Investors were mostly active in the pharmaceuticals sector, which accounted for 14.4 per cent of the day's total turnover, followed by the food and engineering sectors.
Most of the large-cap sectors posted negative performance. The banking sector experienced the highest loss of 1.66 per cent, followed by the power, non-bank financial institutions, pharmaceuticals and telecommunication sectors.
Losers took a strong lead over gainers. Out of 397 issues traded, 270 closed lower, 79 ended higher and 48 remained unchanged on the DSE trading floor.
Bangladesh Shipping Corporation was the most traded stock, with shares worth Tk 285 million changing hands, closely followed by Beximco Pharma, Uttara Bank, Eastern Lubricant, and Shinepukur Ceramic.
Eastern Cables was the day's top gainer, posting a 9.94 percent gain, while Al-Haj Textile was the worst loser, plunging 9.95 per cent.
The port city bourse Chittagong Stock Exchange also ended lower with the CSE All Share Price Index - CASPI - losing 38 points to 14,470 while the Selective Categories Index - CSCX - shedding 25 points to 8,809.

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