Dhaka stocks perform better in 2021 despite volatility from October to December
Dhaka shares have been on the rise for most of 2021, but have seen volatility in the last three months (October-December) of the year just ended.
Market experts said the market ended the year on a low note despite a cumulative gain of 1,354.6 points as the reopening of booming business activities after the Covid outbreak-related shutdown diverted a huge amount of funds from the market to the productive sectors.
DSEX, the key index of the Dhaka Stock Exchange, rose 25.08% to close at 6,756.65 points on December 30 after gaining 950 points the previous year.
The DSEX hit a record 7,367 points on October 10, 2021.
The country’s capital market was one of the best performing markets in Asia, according to a report.
In line with the previous year, the market has remained bullish since early 2021 against a backdrop of increasing investor participation driven by various regulatory measures and favorable macroeconomic conditions,
Regulatory policies and reforms, including increasing the paid-up capital of small-cap companies, requiring directors to hold 30 percent of joint stock, restructuring the board of directors of weak and non-compliant companies, and Removal from the over-the-counter market has boosted investor confidence in the market, according to market experts.
Additionally, expansionary monetary policy, lower interest rates on bank deposits, and lack of investment options during the Covid pandemic prompted investors to channel their funds into the stock market, they said. .
The average daily turnover on the DSE increased to Tk 1,475.22 crore in 2021 from Tk 648.95 crore the previous year.
The market cap of the DSE climbed 20% or 93,966 crore Tk to close at 5.86 lakh crore Tk on December 30.
The country’s capital market posted an extremely strong performance at the start of 2021, but the market has seen volatility and price corrections in the last few months since September 9, 2021.
As the market gained 63% from January 2020 to September 2021, many investors rushed to take profits on the gains of the last few months of last year.
The money market began to feel a liquidity squeeze as rising inflation prompted the Bangladesh Bank to introduce the Bangladesh Bank Bill as part of a precautionary measure to avoid a possible asset bubble that has added more stress to the capital market.
Therefore, rising interest rates have prompted investors to channel funds from the stock market to other investment options.
In addition, price manipulations involving a number of company shares also severely affected the market.
After media reports of market manipulation, the finance ministry asked BSEC to keep the manipulators out of the market.
The recent standoff between BB and BSEC over issues related to the stock market has taken a heavy toll on the market.
In addition, continued sales of shares by foreign investors was also a concern for investors during the year.
Faruque Ahmed Siddique, former president of BSEC, told New Age that the overall market is better for investors in 2021.
He said, however, that the stock prices of a number of underperforming and fundamentally weak companies had climbed abnormally during the year due to the manipulations of some people and that regulators had failed to end the such abusive practices in the market.
The manipulation must be stopped as it was an obstacle to pricing fundamentally sound companies in the market, he said.
EBL Securities said in its annual market review: “2022 could be an even year for the capital market compared to the year we have been in due to an anticipated rise in interest rates as well as the inflation. “
“The economy is now moving from the recovery phase to the growth phase, which should lead to a decline in monetary and fiscal policy in 2022 compared to the previous expansionary stance in order to contain the acceleration of inflation. “
“Increasing credit to the private sector, selling dollars to maintain the exchange rate, resetting the bank deposit rate above the rate of inflation, limiting liquidity in the money market through auctioning of bills.” can put additional pressure on the money market ”.
Unlike 2021, which was the year of the bullish race for the entire market, companies with strong fundamentals in the consumer goods, pharmaceuticals, engineering, well-governed banking, NBFI and insurance stocks could stand out in 2022 based on the rebounding economy, he said.
The company also said that the average daily revenue in 2022 is expected to remain lower than what the market saw last year.
Asian Frontier Capital (AFC), the investment management firm behind the AFC Asia Frontier Fund, said: “We believe that large cap stocks can do better in 2022, because 2021 has been the year of small and mid-cap stocks, particularly in Bangladesh and Sri Lanka. . ‘