After sharpest fall since 2012, stock market investors pray for a miracle

Md. Hasan, 41, had invested around Tk15 lakh in the stock market two years back. In 2019, he lost over 25 percent of his capital as Ifad auto shares - where he had significant investment - fell over 50 percent over the year.

Hasan also lost money even in blue chip shares like Grameenphone and Square pharmaceuticals.

Mosharraf Hossain, retired service sector employee, lost more than 30 percent of his investment in some banking and NBFI stocks in 2019 alone. Since the interim peak of 2017, his account is 45 percent down.

Like Hasan and Mosharraf, thousands of individual investors spent the year counting their losses. In the last one year, the stock market in Bangladesh witnessed its sharpest fall since 2012.

"Our backs are against the wall," said Mosharraf. "We are now praying for a miracle."

After a 13.8 percent fall in 2018, the broad index of the Dhaka Stock Exchange (DSE) lost 17.3 percent in 2019 - - a 28.7 percent slump over the last two years.

Mutual funds on an average lost more than 11 percent of their net assets in 2019. Although, this is lower than the fall in market index, the fact that even professional investors are struggling has eroded confidence among people.

The situation has left investors distraught. They are now looking towards the government for new initiatives to stabilize the market, along with steps to improve the investment climate.

The Finance Minister and his team will sit with the DSE board today to discuss the market situation. A recently formed five-member committee is also under pressure to fulfil investors' expectations.

"A number of macro-economic indicators are in bad shape. We are hoping these will improve in 2020 and thus have an impact on the market,", Mohammad Ali Akbar, a full time stock investor, told The Business Standard at the beginning of the year's first trading session.

DSEX, the broad-based benchmark of the premier bourse, remained almost unchanged at 4,453 on Wednesday amid a lower market turnover of below TK300 crore.

2019: A year of market depression

Stock investors began 2019 with hopes of an upward market direction. The post-election situation matched their expectations as the DSEX went up to 5,992 within a month in January from 5,386 at the beginning of the year.

But because of macroeconomic headwinds, worsened banking sector health, decreasing fund flow from the money market, sluggish corporate earnings growth and deteriorating investors' sentiments, the year ended on visible market depression.

Over the year no sector apart from non-life insurance and IT generated positive returns for investors, as a dividend adjusted return table by EBL Securities reveals.

The two sectors returned positive as a result of their positive outlook in the current situation. Low cap phenomena also helped the stocks to gain price in a depressed stock market, analysts have said.

A widely perceived currency risk along with foreign owned Grameenphone's ongoing tussle with the telecom regulator pushed foreign investors into a position of becoming a net seller of stocks at the DSE for the tenth consecutive month till the end of 2019. In the previous year too, foreign portfolio investors sold more stocks than they bought at DSE.

Most of the blue-chip and large cap stocks went through a price fall.

Investors' lower participation over the year pushed the DSE's average daily turnover 12.8 percent lower to Tk 480 crore. Turnover velocity ratio, which gives an idea of how much of issued securities traded once over the year, came down to 34 percent in 2019 – the second lowest in a decade. It indicated the stock market's growing distance with investors.

Sponsors' share sales too hurt investors' confidence in 2019. A City Bank Capital Resources report said over the year sponsors of 27 listed companies divested from their company while only 9 companies saw their sponsors increase their stakes.

Market performance in Bangladesh is a scene which diverges from peer countries tagged as frontier and emerging markets. Vietnam, Thailand, Sri Lanka, Pakistan and India – all had positive stock market returns in 2019.

Outlook 2020

Most equity research teams have enlightened their clients in the private domain with a professional outlook for 2020. Most of those projections are negative.

Two such reports obtained by The Business Standard reveal analysts are still cautious about the stock market.

One of the reports projects that the market will follow the ongoing downtrend over the first half of the year as the indicators they are tracking are unlikely to improve.

However, the authors of the report are optimistic about bargain hunters, when buying increases as prices hit rock bottom.

The average dividend yield of Bangladeshi stocks is 3.7 percent now, which means investors are getting an average of 3.7 percent cash dividend annually from listed companies. The ratio is similar to that in Sri Lanka, better than in Vietnam, Thailand, and much better than in India.