Dhaka Stock Exchange became the worst performer in Asia this year, ridiculing the premier bourse’s ranking last year when it was the third among the global best, according to Bloomberg News.
The Dhaka bourse lost 25 percent in the last nine months this year, while its general index advanced 82.81 percent last year.
The steep fall in the indices was mainly due to various topsy-turvy initiatives by the stockmarket regulator and the central bank, said analysts.
Prof Mahmood Osman Imam, a teacher of finance at Dhaka University, said: “The initiatives of the regulator and the central bank created a credit crunch that dented the investors’ confidence and pulled down the market.”
Bangladesh’s stockmarket at first bubbled and then burst following sharp but irrational gains last year, said Imam, also a member of the index development committee of the Dhaka Stock Exchange.
Imam said the government missed a great chance last year to collect funds for developing the country’s infrastructure.
New issues and market friendly initiatives are important for developing the markets, said Imam.
The government should go for motivational packages for high profile non-listed firms to encourage them to be listed on the bourses, he added.
However, he said the authorities of many non-listed firms do not want to lose control on management and are not interested to follow the listing rules.
The current price earnings (PE) ratio, which is 16.34 on September 6, is lucrative for long term investment, said an official of the Securities and Exchange Commission.
“We are working hard to develop the country’s stockmarket as all kinds of rules and regulations will be reformed soon,” he said.
However, he said various domestic factors such as soaring inflation and high interest rates for borrowing money dampened investors’ confidence.
The Bangladesh Bank has increased the policy rates for the fifth time in the last 13 months as non-food inflation soared in the last few months.
The central bank recently raised the repurchase rate, at which it lends to commercial banks, to 7.25 percent from 6.75 percent. The reverse repurchase rate was hiked to 5.25 percent from 4.75 percent.
Market capitalisation declined by Tk 60,126 crore in the last nine months and now stands at Tk 290,674 crore. In 2010 market capitalisation gained 84 percent and reached Tk 350,800 crore.
The Indian stock market, hit by global woes and a high inflation-interest rate regime, has been the second-worst performer in Asia this year, according to Bloomberg.
The Bombay Stock Exchange Sensitive Index, or Sensex, declined about 18 percent so far this year.
Most Asian markets lost between 10 percent and 15 percent this year, as a worsening eurozone debt crisis and fears of a double-dip recession in the US have eroded investors’ confidence.
Meanwhile, the Dhaka bourse’s benchmark general index, DGEN, closed to 5,920 points, after plunging 97 points or 1.61 percent yesterday.
Courtesy of The Daily Star