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Stocks keep bleeding as investors are jittery ahead of polls

DSE core index hits 3-month low

FE REPORT | November 21, 2023 00:00:00

Stocks plummeted further on Monday, with the key index of the Dhaka Stock Exchange (DSEX) dipping to a three-month low, as jittery investors continued to dump their holdings to avoid further erosion of their portfolios.

The market has remained bearish for more than a year for concerns over macroeconomic challenges. The imposition of floor price and now political tension brewing ahead of upcoming national polls only exacerbated the situation.

The market witnessed selling pressure from the very beginning of the session, primarily triggered by the recent fall in trendy securities.

The top negative index contributors were LafargeHolcim, Sea Pearl Beach Resorts, Emerald Oil Industries, and Olympic Industries. These five stocks accounted for one-third of the index fall.

The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), finally slid more than 14 points or 0.23 per cent to settle at 6,225, the lowest since August 16.

It shed 32 points in the past three trading days.

Two other indices also ended lower. The DS30 index, comprising blue chips, dropped 4.82 points to finish at 2,105 and the DSE Shariah Index (DSES) fell 2.72 points to close at 1,351.

"The investors focused on protecting their funds from the ailing market," said EBL Securities.

The ongoing depressed market situation, liquidity crunch and a lack of institutional participation altogether eroded investors' confidence, said Prof Abu Ahmed, a former chairman of the economics department of the University of Dhaka.

Large-cap stocks declining

The large-cap stocks, which dominated the market earlier, remained unmoved, as limited opportunities to liquidate assets have made investors reluctant to inject fresh funds, he said.

Profit-making companies, such as LafargeHolcim, Sea Pearl Beach Resorts, Emerald Oil Industries, and Olympic Industries, were the index draggers.

LafargeHolcim made a profit of Tk 5.21 billion in the first nine months through September this year. Yet, its stock fell 1.3 per cent to Tk 67.90 on Monday.

Similarly, Sea Pearl's revenue jumped more than 113 per cent, while profit soared a staggering 335 per cent year-on-year to Tk 701 million in FY23. But the stock fell 2.70 per cent on Monday, taking the loss to 6 per cent in the last one month.

Rising junk stocks

On the other hand, junk stocks, such as Khan Brothers PP Woven Bag Industries, Shympur Sugar Mills, BD Thai Aluminum, and Central Pharmaceuticals, have kept rising on the prime bourse despite their poor business performance in the latest quarters.

The loss-making companies have not been providing dividends for a long time.

These junk stocks have been significantly beating their industry peers that are in regular business operation, posting profits and giving dividends to their shareholders.

Khan Brothers PP Woven Bag Industries, which suffered losses for the past four financial years, doubled in a month to Tk 67.40 on the DSE through Monday.

The company's cumulative losses amounted to Tk 47 million at the end of FY23. It also incurred a loss of Tk 0.98 million in the July-September quarter this year.

Another junk stock, Shympur Sugar Mills soared more than 50 per cent in the month to Monday although it has shown no sign of business growth and profitability and is unlikely to give any return to shareholders in the near future.

The state-run sugar mill has reported massive losses for a decade. It suffered a loss of Tk 218 million in FY23 alone. It also failed to declare a dividend for more than a decade.

The junk stocks surged 37-116 per cent in a month, the DSE data showed.

Small-cap cos mostly traded

Turnover, another important indicator of the market, stood at Tk 4.43 billion on the country's prime bourse, slightly up from Tk 4.33 billion the day-before.

Losers took a strong lead over gainers, as out of 294 issues traded, 124 saw price erosion, 19 closed higher while 151 remained unchanged on the DSE trading floor.

Small-cap stocks dominated the turnover list. C&A Textile became the most-traded stocks, with shares worth Tk 508 million changing hands, followed by Fu-Wang Ceramic, Yeakin Polymer, Emerald Oil Industries, and Central Pharmaceuticals.

Oimex Electrode was the day's top gainer, soaring 8.96 per cent, while Emerald Oil Industries the worst loser, shedding 9.22 per cent.

The Chittagong Stock Exchange (CSE) also ended lower, with its All Share Price Index (CASPI) shedding 25 points to settle at 18,479 and the Selective Categories Index (CSCX) losing 15 points to close at 11,052.

The port city's bourse traded 3.36 million shares and mutual fund units with a turnover volume of nearly Tk 63 million.

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