Stocks end a rough year, 2023 also looks shaky
The year, starting with key interest rates low, ended much worse as the interest rate of the government’s 91-day Treasury bills rose to over 6.5%in December from 2.5% in January
Dhaka and Chattogram stocks closed in green in the last trading session of 2022, but ultimately bid farewell to a volatile year with losses.
Roller coaster ride-loving investors lost 33% in general insurance stocks on average, while jute, travel-leisure generated over 70% return for them, while most sectors caused capital erosion over the year.
And, due to the recessionary global forecasts, unresolved Ukraine crisis alongside local factors— pre-election uncertainties, banking sector crisis, tightening money market, depreciating Taka, and stressed forex reserve —analysts are barely expecting a notable improvement in 2023.
The market started 2022 with an anticipation for natural correction and recoveries, following two big winning years during the pandemic.
Keep updated, follow The Business Standard's Google news channel
But, the unforeseen Ukraine war that broke at the end of February drastically hurt the market bulls. Even the extreme regulatory measures like floor price restriction failed to heal their wounds at the end of the year. Instead, the restrictions dried up the secondary market liquidity.
DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), closed 8.1% lower at 6,207, while the blue-chip index DS30 suffered the biggest fall of 13.3% due to a selling pressure from the foreign investors and natural correction of pandemic-time winners like Beximco Ltd.
The year, starting with key interest rates low, ended much worse as the interest rate of the government's 91-day Treasury bills rose to over 6.5%in December from 2.5% in January.
While the official inflation increased to nearly 9% from less than 6% a year ago, taka depreciated by more than 20% in less than a year.
As the negative outlook did not let the bulls take over the market helm and most of the stocks were stuck on the price floors in the last quarter, average daily turnover in the DSE declined to Tk960 crore in 2022 from Tk1,475 crore in the previous year, which peaked to over Tk1,640 crore in the roaring bull market of 2010.
The bourses had Treasury bonds and Sukuk in exchange trading for the first time in 2022. But the Treasury bonds are yet to be traded vibrantly. Bond issuers raised a decent sum from the capital market, while equity capital raising through initial public offerings (IPOs) or right share issuances dropped.
14 companies raised Tk1,233 crore equity in total through IPOs in 2021, which dropped to only 6 companies altogether raising Tk713 crore in 2022.
Treasury bonds, which went live for exchange trading in October, added over Tk2.5 lakh crore to the DSE's total market capitalisation of Tk7.61 lakh crore at the year end. A year ago, the total market capitalisation was Tk5.42 lakh crore.
Criticism of the Bangladesh Securities and Exchange Commission (BSEC) was louder in 2022 because of its frequent market interferences, and the unfolding stories of market manipulations during the previous leg of bull market in 2020-21 and their lame punishments.
Investors suffered a lot, especially in the second half of the year, due to the market illiquidity and weakening confidence amid unfolding faces of the macroeconomic challenges.
The regulator, at the end of the year, started to remove the unconventional floor price restriction from batches of scrips and it is expected to accomplish the process in early 2023.
However, analysts are barely expecting a bull market sooner as they keep in mind the underlying economic factors.
What to expect in 2023
"The capital market is expected to remain shaky in 2023. Volatility is likely to persist due to concerns regarding the global recessionary outlook and the slashed GDP growth forecast of Bangladesh for the fiscal year 2022-23," reads the year-end market commentary of EBL Securities.
There remains both some upside and downside as the analysts are expecting the DSEX to hover within 5,500-6,500 range while daily turnover may increase to Tk600-800 crore in the DSE from the dwindled level of Tk300 crore nowadays.
Investors are likely to remain watchful amidst the possibility of persistent inflationary pressure, upward adjustments in interest rate cap, and crunched liquidity in the money market, analysts further said.
However, market sentiment is expected to stabilise by the latter part of the new year as economic tensions are expected to ease due to recent decline in LC openings and import bills, as well as receiving the first tranche of the IMF loan instalments which will pave the way to a possible improvement in the country's current account deficit and foreign exchange volatility during the period.
