Stocks plunge for fifth week, as budget brings no cheer

Stocks continued their downward slide for the fifth week in a row, with the investors remaining subdued as the national budget for FY 2024-25 failed to meet the expectations of the investors.
Moreover, pre-Eid sale pressure has intensified the market fall in the already bearish market, analysts said.
Instead of making attempts to help the market recover from the perpetual decline, the budget proposed imposing capital gain tax on individual investors applicable when gains exceed Tk 5 million.
The Finance Minister proposed capital gain tax for the first time on individual investors at a time when the stock market is going through a tough time amid lingering macroeconomic challenges.
Apart from the capital gain tax, the corporate tax rate gap between listed and non-listed firms has been proposed at 5 per cent from the existing 7.50 per cent, which analysts think would discourage well-performing companies from going public.
The budget has proposed an opportunity to invest undisclosed money in securities, flat, and lands etc, but market analysts fear that the expected additional cash will mostly go to less-risky areas of investment, real estate for example, rather than the volatile equity market.
Subsequently, the market began the week on a sharp decline, losing 168 points in the first three days after the budget announcement, dragging the index to 42-month low. The index, however, managed to recover 48 points in the last two days, but failed to offset the early losses.
DSEX, the prime index of the Dhaka Stock Exchange (DSE), finally slid more than 119 points or 2.28 per cent to settle at 5,117.
The DSEX index lost 548 points in the past five weeks, wiping out Tk 780 billion from the DSE market-cap.
"Investors were not happy with the budgetary measures tied to the capital market," said Md Sajedul Islam, managing director of Shyamol Equity Management.
So, many investors exerted pressure to sell off their holdings, he said, adding that the pre-Eid sale pressure intensified stocks' downward spiral.
"Stocks continued to face bearish headwinds as budgetary proposals to impose capital gain tax and the reduced tax rate gap between listed and non-listed companies negatively affected investor sentiment," said EBL Securities.
As a result, investors reduced their capital market exposure further amidst an uncertain market outlook, said the stockbroker.
The DSE Brokers Association of Bangladesh (DBA) has already raised concerns and urged the government to delay imposing capital gain tax on individual investors for at least one year considering the depressed market condition.
"We are not against the capital gain tax, but this is not the right time. It has engendered a negative sentiment among investors in the already bearish market," said Md Saiful Islam, president of the DBA, at a post-budget press briefing on Tuesday.
The DBA also urged the government to reconsider some of its key proposals, including formulating a roadmap for listing state-owned entities, tax waiver for new BO account holders, and a reduction in tax rate against commission income from share transactions by brokerage firms.
This week, The blue-chip DS30 index, a group of 30 prominent companies, lost more than 36 points to 1,822 while the DSES index, which represents Shariah-based companies, fell 29 points to 1,108.
Power Grid, Square Pharma, Khan Brothers PP Woven Bag Industries, NCC Bank and BAT Bangladesh suffered the biggest losses and contributed largely to the weekly index plunge.
They jointly accounted for more than one-third index fall of the week, according to EBL Securities.
This week, the total turnover of the DSE dropped to Tk 18.82 billion, down from previous week's Tk 22.58 billion.
Accordingly, the average daily turnover dropped to Tk 3.76 billion, which was 17 per cent lower than the previous week's tally of Tk 4.52 billion.
Three sectors -- pharmaceuticals, food and textile -- accounted for almost half of weekly turnover.
About 82 per cent stocks saw price erosion, as out of 394 issues traded, 323 declined, 54 closed higher and 17 remained unchanged.
All sectors endured price fall, with jute facing the highest correction of 10.7 per cent, followed by paper, ceramic, travel, tannery, engineering and non-bank financial institutions.
Beacon Pharma became the most-traded stocks with shares worth Tk 860 million changing hands, followed by Lovello Ice-Cream, Asiatic Laboratories, Sea Pearl Beach Resorts and Central Pharma.
The Chittagong Stock Exchange also ended sharply lower, with its All Shares Price Index (CASPI) shedding 399 points to 14,547 and the Selective Categories Index (CSCX) losing 241 points to 8,748.

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