Stocks see biggest single-day fall in over a month after downgrade of 28 cos

Stocks logged the biggest single-day fall in over a month on Thursday, a day after the stock exchange downgraded 27 firms to 'Z' category for non-compliance with the securities laws.
Such a decision triggered panic selling, causing the benchmark index to drop below the 5,700-mark at the opening.
Finally, DSEX, the prime index of Dhaka Stock Exchange (DSE), tumbled more than 97 points or 1.70 per cent to settle at 5,639 points.
It was the biggest single-day fall after August 21 when the DSEX plunged 108 points.
During the trading hours, the DSE downgraded another company, Union Insurance, to Z category as it failed to disburse declared dividends.
Although the Z-category companies saw a huge price erosion, they had insignificant impacts on the market index.
The highest index dragger, however, was Islami Bank Bangladesh which lost 8.5 per cent, contributing almost 29-point fall in the prime index alone.
The Islami Bank took such a big hit after an 11-day rally as the securities regulator on Wednesday ordered a probe into its unusual price hike.
The stocks tumbled to the red due to heavy sell-offs right from the start of the session as investors adversely reacted to the regulatory decision of reclassifying 27 stocks into the Z category, according to a market review of EBL Securities.
"Investors decided to trim their equity exposure amid uncertain market momentum," it added.
Most 'Z' companies hit the lower circuit-breaker as risk-averse investors exerted selling pressure.
Md. Ashequr Rahman, managing director of Midway Securities, said that a company's shift to 'Z' category leaves its shareholders in a precarious position.
Investors who bought shares using credit must pay off their loans, as 'Z' category stocks are not considered marginable securities. Consequently, they may be forced to sell their securities if they cannot repay the margin loans.
"This is why the degradation of a large number of companies significantly impacted the index on Thursday," Mr Rahman said.
He noted that the previous commission's policies during the COVID period contributed somewhat to the mismatches in ensuring proper listing categories based on performance.
In 2020, the securities regulator allowed companies to remain in their existing categories without meeting the necessary requirements, as their business operations were disrupted by the COVID pandemic.
Rahman said that even after 2022, the regulator halted degradation on a case-by-case basis, despite the Dhaka bourse's desire to move non-performing companies to the 'Z' category.
Later, the securities regulator issued a directive in May 2024, allowing the stock exchanges to revise the companies' listing category in line with the set rules.
Finally, the stock exchanges degraded a total of 28 companies.
On the day, the blue-chip DS30 index, a group of 30 prominent companies, also plunged 30 points to 2,065 while the DSES index, which represents Shariah-based companies, shed 31 points to 1,262.
The market turnover, a crucial market indicator, stood at Tk 5.30 billion, which was 31 per cent lower than the previous day's turnover of Tk 7.70 billion.
Investors were mostly active in the banking sector, which accounted for 36 per cent of the day's total turnover, followed by pharma (12.3 per cent) and telecom (7.2 per cent).
Social Islami Bank became the most-traded, with shares worth Tk 403 million changing hands, closely followed by Islami Bank, Grameenphone, Brac Bank, and Global Islami Bank.
The Chittagong Stock Exchange (CSE) also saw sharp decline with its All Share Price Index (CASPI) shedding 208 points to settle at 15,793 while the Selective Categories Index (CSCX) lost 99 points to settle at 9,571.

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