Stocks drop on regulatory steps

Dhaka stocks passed a bearish last week, mainly due to regulatory intervention in the market.
The week-on-week benchmark index of Dhaka Stock Exchange — DSE General Index — declined 123 points, or 1.91 percent, to 6,309.
Analysts said the market lost the momentum that prevailed the previous week, as the cooling measures taken by the Securities and Exchange Commission kicked in.
First, SEC tightened the share credit facilities by reducing the margin loan ratio to 1:1 from 1:1.5. The new ratio came into effect last Sunday, and the market shed more than 2 percent.
Defying the regulator’s price curbing measures, the market gained nearly one percent in the next two trading sessions.
In a second effort, the SEC on Wednesday asked all merchant banks and top brokerage houses to submit portfolio statements of 50 of their largest investors. On that day, the market lost more than one percent and the trend continued in the remaining days of the week.
“Apparently aimed at ensuring the enforcement of margin lending rules, this initiative had the effect of taking some steam off the market,” BRAC-EPL, an investment bank, said in its weekly analysis.
“The market movement this week (last week) was mainly in response to two initiatives by the regulators,” it said.
The BRAC-EPL analysis also said the investors remain cautious with the regulator’s latest moves. “It appears that investors were taking a wait and see approach to determine the cumulative effect of these regulatory directives,” it said.
Rumours of further tightening of share credit and the price earnings (PE) ratio also shook share trading.
On Wednesday, a rumour spread that the regulator would further tighten share credit and the PE ratio, which led the market to a fall. It was a rumour and still is.
In response to the regulatory measures, the market experienced a significant decline in trading volume.
The total and average turnover in terms of value dropped by more than 33 percent to Tk 7,244 crore and Tk 1,448.84 crore. The total number of shares and mutual fund units transactions slipped by more than 25 percent to 24.89 crore.
The major sectors — banks, non-banking financial institutions, life insurance and general insurance — were in the negative territory last week.
Losers beat gainers 186 to 71.
Total market capitalisation declined by 0.72 percent to Tk 2,77,611 crore.
Titas Gas, the state-run fuel company, topped the list of turnover leaders with more than 49.45 lakh shares valued at Tk 537.34 crore being traded. The other turnover leaders were Beximco Ltd, BRAC Bank, AB Bank and National Bank Ltd.
Marico Bangladesh was the largest gainer, posting a 15.77 percent rise, followed by ICB Employees Provident Mutual Fund, Phoenix Finance 1st Mutual Fund, DBH First Mutual Fund and ICB AMCL Islamic Mutual Fund.
Maksons Spinning Mills was the biggest loser, posting a drop of 42.86 percent, followed by Fareast Islami Life Insurance, Meghna Life Insurance, National Life Insurance and Samata Leather.
Chittagong stocks however rose last week, with the CSE Selective Categories Index increasing by 0.58 percent to 11,974.
More than 2.39 crore shares and mutual fund units were traded on the Chittagong Stock Exchange with a turnover of Tk 413.91 crore.
Losers however beat gainers 111 to 86, with five securities remaining unchanged on the port city bourse.
Beximco Ltd topped the list of turnover leaders with more than 19.54 lakh shares worth Tk 57.40 crore being traded. The other turnover leaders were United Airways, Beximco Pharma, Titas Gas, BSRM Steel and Pubali Bank.
Marico Bangladesh was the largest gainer, posting a 17.61 percent rise, followed by AIMS 1st Mutual Fund, ICB Employees Provident Mutual Fund, EBL 1st Mutual Fund, ICB AMCL Islamic Mutual Fund and Grameen Mutual Fund One.

Courtesy of The Daily Star