Dhaka stocks reach new heights

Experts warn market becoming ‘too risky’
The bullish Dhaka stocks continued to soar on Wednesday reaching new heights amid experts’ warning that the market had become ‘too risky’ for investors, especially newcomers.
The benchmark general index of the Dhaka Stock Exchange crossed the 6700-point mark for the first time on Wednesday to close at 6,719.83 points, up by 86 points, or 1.30 per cent, from Tuesday’s closing.
The general index of the bourse has gained by more than 500 points since the biggest fall in 14 years on July 25, when the market shed around 203 points.
Prices of most issues have become over-heated in a month but investors continued to pour in fresh funds into the market hoping for quick gains.
Market experts, including the DSE president Shakil Rizvi, said the investors, especially new investors, were in a ‘risky zone’ as they were buying ‘over-priced’ shares.
‘New investors will definitely be losers as many of them are buying over-priced shares. They will lose the capital when there is a market correction,’ Shakil told New Age on Wednesday.
He said an increase in the demand for shares fuelled by influx of funds had propelled the market.
‘The market has grown as more than a million new investors have joined the market in a year. Besides, some companies have also performed well. We need more new issues on the market immediately,’ he said.
The market index, which was around 3,039 points in August, 2009, more than doubled in a year while the capitalisation reached Tk 3008.99 billion on Wednesday against Tk 1307.70 billion on August 18, 2009. In this period, only 23 new issues have entered the market.
Market experts have been calling for new issues for a few months but there was no active move by the regulators or the government to bring new issues to the market.
Salahuddin Ahmed, a former chief executive officer of the Dhaka Stock Exchange, said new issues, right shares and bonus shares had added roughly 15 per cent added value to the market capitalisation in a year.
‘The rest of the 85 per cent increase in market capitalisation was due to the rise in prices of existing issues. This situation is dangerous for investors as investment risk increases greatly,’ he said.
He said an increase in the supply of issues could be the only way out of this situation.
Capital market analyst Mohmood Osman Imam, who teaches finance in Dhaka University, said
the rising gap in demand and supply was pushing
up the market further. ‘There is a huge influx of liquidity in the market but it lacks quality shares to meet the demand.’
‘The greed factor among investors is fuelling this staggering rise,’ said Yawer Sayeed, managing director of the AIMS of Bangladesh, a firm that manages mutual funds.
‘The absence of any other avenue for investment is bringing more money into the market, and as a result, prices are swelling beyond a reasonable level,’ he said.
Of the total 256 issues traded on the day, 157 advanced, 91 declined and eight remained unchanged.
The day’s total turnover stood at Tk 2,177.34 crore, up by Tk 249.63 crore from Tuesday’s.
The BSRM Steel topped the turnover leaders with a transaction of Tk 87 crore.
The other turnover leaders were Tiats Gas, Beximco, Summit Power, Prime Finance Ltd, Aftab Auto, Lanka Bangla Finance Ltd, United Leasing, Summit Port alliance Ltd and S Alam Cold Rolled Steels Ltd.

Courtesy of NewAge