Frequent changes in the directives by the stock market regulators and a decreased participation of large and institutional investors have resulted in the current crisis in the Dhaka bourse which collapsed again on Sunday, analysts said.
They said a section of institutional investors, who had already taken away from the market huge profits in December, remained inactive and waiting for share prices to come further down to make investment.
Analysts also said investors should not be panicked as prices of some overheated issues had come down to reasonable limit in the downward trend in the last three days.
The general index of Dhaka Stock Exchange fell by 406.29 points, or 5.70 per cent, to close at on Sunday after it had declined by 447 points in the previous four trading days as investors driven by panic went for heavy sell-offs.
‘The SEC’s two latest directives and Bangladesh Bank’s monetary policy discouraging investment in unproductive sector made the investors more nervous as they were yet to recover from the market collapse on January 20,’ said an analyst.
Market analyst Akter H Sannamat said that Sunday’s fall should not be considered as ‘market correction’ as the index fell sharply on the day. ‘A vested quarter is spreading rumour that the market would fall further shattering the investors’ confidence,’ he said.
Reaz Islam, chief executive officer of LR Global Bangladesh Asset Management Company, however, said that the market fell on Sunday because of market correction.
‘I think Sunday’s fall is a part of market correction as the prices of many issues were overvalued. Share prices need to come down further by around five per cent. Then the market will be lucrative for investors,’ he said.
Reaz said the market faced liquidity shortage as funds were diverted by investors for two big initial public offerings of Mobil Jamuna and MI Cement. ‘I think the supply of funds will increase to the market when the investors get refunds of the IPOs.’
He advised investors not to be worried as the market would rebound soon.