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Dhaka stocks witnessed a surge in most of 2021 but experienced volatility in the closing three months (October-December) of the just concluded year.
Market experts said that the market finished the year on low note despite 1,354.6 points aggregate gain as the reopening of business activities in full swing after the Covid outbreak-related closure diverted a huge amount of funds from the market to the productive sectors.
DSEX, the key index of the Dhaka Stock Exchange, advanced by 25.08 per cent to close at 6,756.65 points on December 30 after gaining 950 points in the previous year.
The DSEX hit a record high of 7,367 points on October 10, 2021.
According to a report, the capital market of the country was one of the best performing markets in Asia.
In line with the previous year, the market remained bullish from the beginning of 2021 amid growing investor participation driven by various regulatory measures and favourable macro-economic conditions,
Regulatory policies and reforms, including raising paid-up capital of small-capitalised companies, forcing directors to maintain 30 per cent joint shareholding, restructuring board of weak and non-compliant companies and abolishment of over-the-counter market boosted the investors’ confidence in the market, market experts said.
Moreover, expansionary monetary policy, lower interest rates on bank deposits and lack of investments options during the Covid pandemic prompted investors to channel funds to the stock market, they said.
The daily average turnover on the DSE jumped to Tk 1,475.22 crore in 2021 from Tk 648.95 crore in the previous year.
The market capitalisation of the DSE soared by 20 per cent or Tk 93,966 crore to close at Tk 5.86 lakh crore on December 30.
The capital market of the country had an exceedingly strong performance in the early 2021, but the market witnessed volatility and scrip-wise price corrections in the last few months since September 9, 2021.
As the market made a gain of 63 per cent from January, 2020 to September 2021, many investors rushed to book profits from the gains in the last few months of the past year.
The money market started feeling liquidity contraction as rising inflation prompted the Bangladesh Bank to introduce Bangladesh Bank Bill as part of a precautionary measure to avert possible asset bubble which added more stress to the capital market.
Consequently, rising interest rate enticed investors into channelling funds from the stock market to the other investment options.
Besides, price manipulation involving a number of companies’ shares had also affected the market badly.
After the media reported about market manipulation, the finance ministry instructed the BSEC to keep manipulators away from the market.
The recent tussle between the BB and the BSEC over stock market related issues weighed heavily on the market.
Moreover, a continued share sales by foreign investors were also a concern for investors over the year.
Faruque Ahmed Siddique, a former chairman of the BSEC, told New Age that the overall market was better for investors in 2021.
He, however, said that share prices of a number of non-performing and fundamentally weak companies soared abnormally over the year amid manipulation by some people and the regulators failed to stop such malpractices on the market.
The manipulation must be stopped as it was barrier to pricing of fundamentally sound companies on the market, he said.
EBL Securities in its yearly market review said, ‘2022 might be an even year for the capital market compared with the year we passed due to an anticipated spike in interest rates as well as inflation.’
‘The economy is now shifting from the recovery to the growth phase, which should result in a monetary and fiscal policy setback in 2022 as against the previous expansionary stance in order to tame accelerating inflation.’
‘Rising of private sector credit, selling dollars to maintain the exchange rate, re-setting bank deposit rate above inflation rate, limiting liquidity on money market by bills auctions may put further pressure on the money market.’
Unlike 2021, which has been the year of bull-run for the broad market, companies with sound fundamentals from the consumer goods, pharmaceuticals, engineering sectors, well-governed bank, NBFI and insurance stocks may stand out in 2022 based on the rebound of the economy, it said.
The firm also said that the average daily turnover in 2022 was expected to remain subdued than what the market experienced in the past year.
Asian Frontier Capital (AFC), the investment management company behind AFC Asia Frontier Fund, said, ‘We believe large-cap stocks can do better in 2022 as 2021 was the year of small and mid-cap stocks, especially in Bangladesh and Sri Lanka.’
(NA)
