Monetary policy, banks’ effort to lower interest rates boost investor confidence: Analysts
The Dhaka Stock Exchange (DSE) has started to bounce back after going through weeks of a wobbly phase.
The major bourse has continued a gaining streak for the last two weeks thanks to keen participation by investors, resulting in an increase of Tk3,897 crore in its market capital in this period.
Analysts have credited Bangladesh Bank’s monetary policy for fiscal year 2019-2020 and the effort by commercial banks to lower rates of interest on loans to single digits for this positive streak in the share market.
DSE Brokers’ Association President Shakil Rizvi told The Business Standard that the capital market in the country is directly linked to interest rates on bank loans. Hence, the latest moves by banks to bring down their interest rates on loans have created a positive vibe with investors, he explained.
“It is expected that the single-digit interest rate on bank loans will become effective in the next two to three months,” he continued.
Shakil went on to say: “The latest monetary policy does not have any negative message for the capital market. The national budget for the current fiscal year discourages large investments in savings instruments. Besides, most of the banks, in their half-yearly financial statement published recently, have shown a healthy profit. All this has helped boost the confidence of investors.”
Against this backdrop, he thinks the DSEX, the benchmark general index of the DSE, is expected to gain 500 points.
The president of the DSE Brokers’ Association also pointed to some specific happenings as reasons behind the large fall that the stock market experienced over the past three months.
A surge in bank loan interest owing to the liquidity crisis, the Bangladesh Telecom Regulatory Authority’s decision to reduce the bandwidth capacity of Grameenphone, and the liquidation of Peoples Leasing by the government had a negative impact on the capital market, he said.
Shakil Rizvi however pinned hope on the fact that companies listed in the share market are doing good business. “The stock market depends on the state or quality of business of its listed companies. If the companies do good business, the stock market will remain in good health,” he said.
The DSEX gained 203 points in the past two weeks, from July 22. In the meantime, the market capital increased by Tk3,897 crore.
The key index of the DSE advanced by .71 percent, or 36.48 points, over the past week to finish at 5,169.74 points on Thursday.
The index stood at 5133.26 points at the end of the previous week.
Turnover, a major gauge of the market, increased 10 percent from the previous session to Tk2,202.23 crore from the previous week’s Tk1,998.42 crore on the back of an increased investor participation.
The pharmaceutical sector held lead in the turnover chart with 13.6 percent of the total turnover in the said period. Among the other major sectors in terms of total turnover in the past week there were mutual funds (10.5%); the engineering sector (9.8%); the general insurance, and the power and energy sector jointly (9.3%); and the banking sector (6.3%).
Meanwhile, investors received the highest rate of return in the jute sector, at 14.8 percent. The Jute sector was followed by the ceramics sector (10.5%) and the information and technology sector (8.1%). On the other hand, the mutual fund sector was the highest loser with 19.1 percent fall in prices in the said period.
Monno Ceramics was the highest gainer last week. The stocks of the company witnessed a 51 percent rise over the five working days in the past week. On the other hand, Vanguard AML Rupali Bank Balanced Fund was the highest loser with 37.38 percent fall in price per unit.
The second bourse of the country, the Chittagong Stock Exchange (CSE), also witnessed a gaining streak last week. CSEX, the key index of the CSE, rose by 55 percent to reach 9,604 points at the end of the past week.