Why positive half-yearly earnings reports not reflected on the market?

Large-cap stocks, such as Grameenphone, British American Tobacco Bangladesh, and Robi Axiata, have failed to draw investors though they posted remarkable profit growths for the first half of this year.
Almost all the top 10 large-cap stocks, including some renowned local conglomerates, are struggling to find buyers on the bourses even at lucrative price levels following earnings disclosures.
Most of these stocks, which once dominated the market, have remained stuck at floor for eight to ten months, while low-performing junk stocks have been flying high on speculations.
They did not budge even after the recent stock market filings.
Only Square Pharma, Berger Paints, and LafargeHolcim saw a slight movement since the floor price was imposed more than a year ago. Seven others are confined to the floor.
Analysts say the price restriction discourages investors, including the institutional ones, who make investment decisions based on the market trend, to put money in the big stocks.
Uncertain economic outlook may be another reason as to why fresh investments are not coming in.
According to Prof Abu Ahmed, former chairman of the economics department of the University of Dhaka, the well-performing stocks are not moving only for the floor price.
"If there is no exit point, no one would like to get funds stuck in big-cap stocks," he added.
The floor price regime affected the price performance of the large-cap companies.
Since junk stocks have shown some movement in the market, some investors are betting on them to make short-term capital gains, said Prof Ahmed.
The market has been in bear grip for more than a year since the stock market regulator imposed the floor price. Buyers have shown reluctance to buy stocks even at the lowest price set.
The Bangladesh Securities and Exchange Commission (BSEC) in July last year set the floor price of every stock to halt free fall of the market indices amid global economic uncertainties unleashed by the Ukraine-Russia war.
However, a good number of companies, including the multinational one, showed resilience against the adverse business climate with high profit growths, but there has been no reflection of that on the bourses.
Grameenphone's profit grew at a rate of 14 per cent year-on-year to Tk 19.73 billion in the first half of this year. The telecom company having the highest market value has been languishing at the floor price of Tk 286.6 since September last year.
Robi Axiata, the second-largest telecom operator, also witnessed a significant jump, 140 per cent, in the half-yearly profit to Tk 664 million, compared to the same period of the previous year.
It has not seen a single transaction of its shares for the last few months while the stock has remained unmoved at Tk 30 for the last 10 months.
British American Tobacco (BAT) Bangladesh posted a 4 per cent growth in profit, reaching Tk 9.50 billion. Its stock too is stagnant at Tk 518.7 since September last year.
Investors fear that their investment would become illiquid, said Md Sajedul Islam, senior vice president of the DSE Brokers Association of Bangladesh.
Those, who invested in good stocks earlier, are not active in the market. "If there were no floor, the [stock] prices might have fallen, but they would have risen later. That is the beauty of the stock market," said Mr Islam, also managing director of Shyamol Equity Management.
Meanwhile, Square Pharmaceuticals, Berger Paints and LafargeHolcim Bangladesh have traded slightly above the floor price among the top 10 large-cap stocks.
After remaining at the floor for eight months, Square Pharma took off last month, following a disclosure on a business deal with a local pharma company for outsourcing.
The flagship company of Square Group closed at Tk 211.60 on Wednesday, slightly above the floor price.
LafargeHolcim closed at Tk 67.70, only Tk 2.9 above the floor price while Berger Paints at Tk 1,817.3 on Wednesday. The Indian multi-national paint company is among the fortunate ones that have been above the floor for most of the time since the price restriction was reinstated.
Berger's floor price was set at Tk 1711.60 and it traded at the price between October 27 and December 4.

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