Stocks stay upbeat as capital gains tax cut lifts investor confidence

The benchmark equity index continued its upward trend this week, extending gains for a second consecutive week as the government's decision to lower capital gains tax came as a relief for individual investors.
This week, the National Board of Revenue (NBR) set a 15 per cent tax rate on annual capital gains exceeding Tk 5 million from the buying and selling of shares in listed companies, regardless of the holding period.
As a result, the overall tax burden on taxpayers with capital gains exceeding Tk 5 million will drop to 20.25 per cent from as high as 40.5 per cent earlier.
News of the capital gains tax cut sparked a significant surge in investor sentiment, driving a strong upward movement across key indices, according to market analysts.
Moreover, investors showed increased buying appetite, fuelled by the latest earnings reports, as several listed companies posted hefty profits and declared higher dividends.
Of the five trading days this week, the market ended lower three days while two other sessions witnessed significant gains after the news of capital gains tax cut.
Riding on the substantial price surge of large-cap stocks, the benchmark DSEX index of the Dhaka Stock Exchange soared almost 117 points or 2.25 per cent to settle the week at 5,316.
The DSEX added 202 points in the past two consecutive weeks after losing 616 points in the previous five weeks.
Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA), said the market reacted positively due to the reduction in the tax rate on capital gains.
"The tax cut was much needed to help the market overcome the prolonged bearish trend and to increase the liquidity flow in the market," said Mr Islam.
"Buyers maintained their
dominance across the trading floor, owing to rebound in investor sentiment," said EBL Securities.
The investor optimism was heightened, driven by positive regulatory policy discussions such as early trading settlement time and liquidity support through Investment Corporation of Bangladesh.
Meanwhile, a state-run ICB has secured a state guarantee for a Tk 30 billion loan aimed at boosting its financial base and investments in the capital market.
Price hikes of selective large-cap blue-chip stocks, such as Islami Bank, Beximco Pharma, Square Pharma, Beacon Pharma, Orion Pharma, Walton and Grameenphone, largely supported the market recovery. They jointly contributed 66 points to the weekly gains of the index.
Subsequently, the DS30 index, which represents a group of 30 prominent companies, rose 39 points to 1,965 while the DSES index, which represents Shariah-based companies, gained 43 points to 1,188.
This week, Tk 65 billion was added to the market cap, reaching Tk 6,718 billion at the end of the week.
Turnover, a crucial indicator of the market, rose to Tk 30.29 billion this week, as against Tk 20.83 billion in the week before.
The average daily turnover reached Tk 6.06 billion, up 45 per cent from the previous week's average of Tk 4.16 billion.
Investors were mostly active in the pharma sector, which accounted for 19.5 per cent of the week's total turnover, followed by banking (15.5 per cent) and textile (8.9 per cent).
Most of the traded stocks saw price appreciation, as out of 394 issues traded, 254 closed higher, 111 lower and 29 remained unchanged.
Most of the major sectors posted gains. Fuel & Power booked the highest gain of 5.02 per cent, followed by pharmaceuticals (3.32 per cent), engineering (2.8 per cent), non-bank financial institutions (2.56 per cent), and telecoms (0.65 per cent).
The Chittagong Stock Exchange (CSE) also ended higher, with the CSE All Share Price Index (CASPI) soaring 409 points to settle at 14,851 and its Selective Categories Index (CSCX) rising 253 points to 9,032.

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