Friday, March 1, 2024

Stock prices bounce back amid low turnover, thin transactions

Trading on the DSE resumed Tuesday with a positive note. However, the turnover was abnormally low — Tk 2.06 billion — with a revised circuit breaker mechanism in place for transactions of individual issues.
The revised circuit breaker mechanism, apparantly, discouraged investors from selling their stocks in a situation marked by high demand pressure.
Shares prices on the Dhaka Stock Exchange (DSE) soared and all indices gained nearly eight per cent when the market re-opened after a gap of two trading sessions.
“The market is likely to be stable as the government has taken a series of positive measures regarding the stock market. The measures are expected to bring back the investors confidence,” analysts said.
The steps, taken by the government included lifting of index circuit breaker, postponting the book building method, forming independent commettee to investigate the reson for the build up of the bubble and then the dramtic collapse, seems to have helped restoration of some confidence in the market, they said.
However, they said it is too early to say weather the market will stablise or not.
As soon as the trading floor opened at 11 am, investors started buying shares and within one hour DGEN gained more than 492 points. Over the next three hours the index remained almost flat as most of the scripts touched the individual circuit breaker limits. The general index (DGEN) finnaly clsoed 494 points up.
The institutional investors were the most buyers while retail and non-resident Bangladeshi (NRB) investors were the sellers in the day’s thin trading.
The benchmark DSE General Index (DGEN), the main gauge of the DSE, surged by 7.82 per cent or 494.78 points to end at 6821.08.
The broader DSE All Shares Price Index (DSI) ended at 5666.20, up by 7.66 per cent or 403.09 points. The DSE-20 including blue chips index gained 7.99 per cent or 329.73 points to 4452.55.
However, total turnover came down to only Tk 2.06 billion, which was equivalent to 6.25 per cent of the highest ever turnover on December 05 last.
Total turnover was very low as there were a few sellers on the floor. As a result, many of the investors could not buy shares. The number of transactions on Tuesday stood at only 29200 compared to 389310 on December 05 last.
The market reacted positively as almost all the companies hit the upper limit of their individual circuit breaker on the day.
The SEC reduced the individual circuit breaker limit for individual companies from Tuesday in an effort to control abnormal rise or fall in share prices on a single trading day.
According to the revised circuit breaker system, a share worth up to Tk 200 cannot go up or down by 10 per cent on a single day trading, which was earlier 20 per cent.
Under the revised circuit breaker, market prices of shares ranging between Tk 201 and Tk 500 cannot go up or down by 8.75 per cent or by Tk 37.50.
The limit is 7.5 per cent or Tk 112.50 for shares with price tag between Tk 501 and Tk 1,000.
Stocks with prices ranging between Tk 1,001 and Tk 2,000 cannot increase or decrease by 6.25 per cent or by Tk 100.
The price cannot rise or fall by 5.0 per cent or Tk 187.50 if share value ranges between Tk 2,001 and Tk 5,000.
The limit is 3.75 per cent or Tk 300 for shares worth Tk 5,001 and above.
Professor Abu Ahmed of Economics Department of Dhaka University said, “The individual circuit breaker forced many investors to buy junk shares as they could not go for good shares because of the circuit breaker.”
“The good shares had touched the circuit breaker within a very short time which forced the investors to buy junk shares,” he said.
Many investors said that they did not sell shares as they had bought shares at higher prices earlier. And they were also gaining confidence by the government’s initiatives. So, they want wait for a few more sessions.
“I do not want to sell shares now as the prices are not enough to cover my loss.,” said Salam, a retail investor.
Terming the market’s behaviour “abnormal”, Professor Mahmud Osman of finance department at Dhaka University, said, “The gains do not show that normalcy has returned. The volume of sales was at a two-year low and some weaker stocks have also gained along with fundamentally strong ones.”
“The investors are gaining confidence as the government took some market- friendly steps. There was no panic sale and there were a good number of buyers on the floor,” said Yawer Sayeed, managing director of AIMS Bangladesh, an asset managemnt company.
He also said that the investors will be more confident if the government restructured the Secutirites and Exchange Commission (SEC) within the shortest posible time as it has failed to stabilise the market.
However, he said “We have to wait for a few more sessions to see the final results.”


Via: The Financial Express

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