Stocks see a year of robust return

The country's capital market passed 2020 with robust return compared to the bourses in the region, helped by large-cap companies and supportive measures.
The market, which saw free-fall in March prompting the regulator to set floor prices amid the COVID-19 outbreak, ended the year better than many peers, including that of India.

The benchmark index of the Dhaka Stock Exchange (DSE) posted a 21.31 per cent growth to close the year at 5,402 points on Wednesday, in a sign of stability after the market debacle in 2010-11.
After the NASDAQ of the USA, the DSE posted the highest return not only among regional countries, but also the broad index following investors' increased participation.
In 2020, the premier bourse posted a market return of 21.31 per cent, followed by India, Vietnam, China, Sri Lanka, Pakistan and Malaysia.
The market returns of Hong Kong, France, Thailand, the Philippines, Singapore and UK were significantly lower in 2020 than the previous year.
The DSEX lost more than 1,000 points or 18.52 per cent in 2019. In 2018, the prime index also lost 13.75 per cent. However, in 2017, it soared to 24 per cent.
The total market-cap of DSE surged by 32 per cent to close at over Tk 4.48 trillion on Wednesday, hitting an all-time high, driven by the biggest-ever issue Robi Axiata.
Apart from the listings of Robi and Walton Hi-Tech Industries, many other large-cap companies are completing the process of going public.
Faruq Ahmad Siddiqi, a former chairman of the Bangladesh Securities and Exchange Commission, said the capital market passed a good year as investors' level of confidence in the incumbent commission improved.
"A substantial amount of fund has been injected into the bourses from the money market as business operations were seriously affected by the COVID-19. In that sense, COVID-19 was as a blessing in disguise for the capital market," argued Mr. Siddiqi.
The major regulatory steps, which restored investors' confidence, included imposing large amount of penalties on wrongdoers, compliance with holding between 2.0 per cent and 30 per cent shares by sponsor-directors and the move to restructure the board of non-performing companies.
The regulator slapped around Tk 820 million in fines on different wrongdoers, including listed companies for advancing their own interests breaching rules.
For not holding a minimum of 2.0 per cent shares, 17 directors of nine listed companies lost directorship in 2020.
To help reach the market people's door step, the commission also approved the rules for opening digital trading booths at home and aboard.
Mr. Siddiqi said it is difficult to predict whether the fund, which flew in from the money market, would go back during the post -COVID normalcy in business operations.
Meanwhile, the commission is now working towards developing a digital capital market infrastructure by 2021 so that all the stakeholders can reap benefits.
Two other indices of the DSE also followed the broad index DSEX.
The blue-chip index DS30, which groups 30 prominent companies, also rose by 29.78 per cent or 450.61 points to settle at 1,963.96 points and the DSE Shariah compliant Index jumped 242.28 points or 24.23 per cent to close at 1,242.11 points during the year.
The daily turnover, another important gauge, stood at Tk 6.49 billion on an average, up by 33.50 per cent year-on-year, in the outgoing year.
The DSE market capitalisation to GDP (gross domestic product) ratio reached16 per cent, while the market P/E (price earnings) stood at 11.80 at the end of 2020.
The CASPI, All Share Price Index of Chittagong Stock (CSE), also showed more than 15 per cent growth year-on-year to finish the year at 15,592 points. The port city's bourse's market-cap also hit an all-time high of Tk 3.75 trillion as of Wednesday.
The market was in the doldrums in the first half of the year amid a confidence crisis of investors and the liquidity crunch in the banking sector while the Covid-19 worsened the situation.
The key index of the DSE tumbled to 3,603 on March 18, 2020, which prompted the securities regulator to set floor price of all stocks from March 19 to prevent free-fall of the index.
Trading on the bourses has also remained shut for 66 days (March 26 to May 30), the longest closure of the market since the Liberation War due to the government holiday as part of its efforts to contain the spread of the deadly virus.
In May, the government recast the BSEC with new chairman and along with four members with a view to establishing a vibrant capital market.
After resuming the office, the new commission took a flurry of stern actions against errant directors of listed companies and cancelled some questionable IPO proposals, sending out a clear message that it would not be easy to manipulate and bring weak companies to the market under the watch of the new leadership.
The new commission also warned of actions against the rumour-mongers under the Digital Security Act.
The new commission has also moved to restructure the boards of 'Z' category companies and continued with its tough stance on gamblers and slapped fat fines on several companies as part of the clampdown on the wrongdoers.
The market started rebounding after July amid growing confidence stemming from the regulatory actions and the gradual traction in economic activities.
Asked BSEC chairman Prof. Shibli Rubayat Ul Islam said in the outgoing year, they achieved around 30 per cent of the target set for the market development.
"The securities regulator will remain strict to its stance on reducing manipulation in the market," Mr. Islam said.
He said the market's depth will be enhanced gradually as many large cap companies having good fundamentals are in the queue of going public.
"Around 60 per cent target of market development will be achieved by the next year. I hope the year 2021 will be more fruitful for the capital market," Mr. Islam added.
The new commission continued its effort to establish a vibrant capital market by approving a good number of large-cap companies having good fundamentals, including Robi Axiata.
Eight firms, including Robi, raised an aggregate amount of Tk 9.62 billion by floating IPOs in the outgoing year, which has been the highest since 2014.
However, funds raised by listed companies through the issuance of rights shares fell sharply in the outgoing year, hitting five-year-low since 2015. Only one listed firm-Pragati Life Insurance-netted about Tk 230.27 million by issuing more than 15.35 million rights shares of Tk 15 each, including Tk 5.0 as a premium in 2020.
President of the Bangladesh Merchant Bankers Association (BMBA) Md. Sayadur Rahman said the market finally closed the year with a good return following the market supportive measures and the listing of large cap companies, including Robi.
He said the investor-friendly regulatory directives and the listing of some renowned companies restored the much-needed confidence among investors.
"I hope 2021 will be a year of opportunities in the capital market as Bangladesh is going to celebrate its Golden Jubilee of independence this year and the market outlook will remain rationally upward riding on favourable macro scenarios," said Mr. Rahman.
Mostaque Ahmed Sadeque, managing director of Investment Promotion Services, said that factors like lower returns on the money market amid excess liquidity in the banking sector, hope for the Covid-19 vaccine and strong regulatory actions against suspected rogue traders prompted sideline investors to inject fresh funds into stocks in recent months.
In a market review, BRAC EPL, a leading brokerage house, expected the arrival of an effective vaccine and a return to normalcy by early next year,
"Investors believe the stock market is likely to regain strength with the economic recovery," it noted.
As the Covid-19 vaccination is being rolled out in major trading partners of Bangladesh, investors' confidence strengthened as this indicates continued rebound of the global economy, commented EBL Securities.
The stockbroker noted that regulatory moves to build a stable and vibrant capital market and enlistment of quality IPOs in the market also contributed to the index reaching its highest point in 18 months.
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