Bangladesh’s capital market has a turbulent year



The country’s capital market had another turbulent year with a 25 percent return in the main stock exchange’s core index despite feuds between the two concerned regulators over some policy issues.

In the outgoing year 2021, the Dhaka Stock Exchange (DSE) also posted a decade-high daily turnover value as well as an increase in the ratio of market capitalization to GDP (gross domestic product).

Daily turnover, a large gauge, stood at Tk 14.75 billion on average in 2021, up 127% year on year.

The DSE recorded the second highest turnover on record, exceeding Tk 3.54 trillion, recorded in 240 trading sessions – executed in the previous year.

The DSE market cap to GDP ratio stood at 18.01%, while the market P / E (price profit) stood at 17.58 at the end of 2021.

Faruq Ahamd Siddiqi, former chairman of the securities regulator, said the market has had a good year, with both index and turnover increasing in value.

“But manipulation was the weaker side of the market. Small-cap stock prices rose abnormally for no good reason.”

He focused on mastering manipulation while increasing the number of quality IPOs.

A steady rally kept the broad DSE index – DSEX – to stay above 6,700 points as momentum bolstered stock market indices despite concerns about virus-induced shocks to the country’s economy in the first place. semester of the year.

The DSEX closed the year at 6,756, up 1,354 points, or 25% year over year, on Thursday, the last trading day of 2021. In 2020, the DSEX posted a return of 21 %.

Strong investor participation, consolidating stock prices, comparatively high corporate profits and low interest rates on bank deposits were the main reasons for the decent year for the Bangladesh capital market.

Speaking on market indicators including performance and rising prices of small-cap companies, IDLC Investments Managing Director Md. Moniruzzaman said the market has had a good year.

“Inactive funds, which were injected into the market during the Covid period, have come out. Thus, the challenge of the new year is to keep the participation of investors spontaneous thanks to the good functioning of the market,” he said. declared.

While the stocks of many underperforming companies experienced unusual price increases over the year, large-cap companies were the largest contributor to the index’s gain.

The major sectors have posted strong returns over the past year, and the heavyweight banking sector posted the highest return with a gain of 15%. It was followed by pharma with 14.9%, telecommunications 14.4%, engineering 11.8%, electricity 9.5% and food 9.30%.

Many stocks with poor dividend payout records and supercharged insurance stocks have also skyrocketed this year. But their contribution to the index was insignificant, said an analyst at a leading brokerage firm.

Among low-key companies, Tamijuddin Textile Mills recorded the largest increase of 1,158%, followed by 1,140% by Paper Processing & Packaging, Sena Kalyan Insurance 603%, Sonali Life Insurance 485% and Fortune Shoes 321%.

Banks and some institutional investors poured money into the market. They preferred stocks with strong fundamentals, which ultimately took the index to a high level.

The market consolidated throughout the year, but momentum picked up in October. The index broke through the psychological barrier of 7,000 points to reach a record 7,367 points on October 10.

Market experts said the weak performance of the money market, several regulatory reforms to create a vibrant capital market, the enlistment of some quality IPOs and undisclosed equity investment opportunities have contributed to the growth. substantial index and market rotation.

The market was bullish amid rising investor confidence – driven by the regulator’s various market support measures, which prompted investors to park new funds in the stocks.

Regulatory initiatives to restore market governance and other reforms, including the removal of the floor price and the re-listing of over-the-counter companies, have had a positive impact on the market.

The introduction of the board of directors of SMEs, the restructuring of companies, the development initiatives for Sukuk and the bond market, the new rules for the award of the initial public offering (IPO) and the change of circuit breaker for the IPOs have helped create a vibrant capital market.

“This current sentiment will only be sustained if we overcome the obstacles of financial indiscipline and the scarcity of diversified products in our capital market,” said a senior official at a leading brokerage firm.

Market capitalization was Tk 5,421 billion, an increase of 21 percent from the previous year.

The CSE All Share Price Index (CASPI) of the Port Cities Exchange also posted a positive return of around 26% year-on-year, to end the year at 19,666.

The stock exchange’s selective categories index – CSCX – also grew 25.6% to 11,813 for the year.

2021 was also one of the best times for the bond and IPO markets. Borrowing companies have moved away from traditional bank loans to turn to the bond market for their financing needs.

In 2021, the Bangladesh Securities and Exchange Commission (BSEC) authorized 23 institutions to raise Tk 125.73 billion through bonds and Sukuk.

The fund raised through Initial Public Offerings (IPOs) also hit a ten-year high in the outgoing year since 2011, as 19 companies raised a total fundraising of over $ 21.80 billion. of Tk in 2021.

Of these companies, 14 raised Tk 12.30 billion through IPOs, four banks Tk 2.0 billion through perpetual bonds and the last Tk 7.50 billion through Sukuk.

Among IPOs in 2021, Union Bank – a fourth-generation private commercial bank – raised Tk 4.28 billion via IPO, which is the banking industry’s largest IPO to date.

Among all sectors, this is the fourth IPO after Robi Axiata (Tk 5.23 billion), Grameenphone (Tk 4.86 billion) and MJL Bangladesh (Tk 4.60 billion), according to the EHR data.

However, in the outgoing year, the number of BO accounts (beneficial owners) decreased by 20.29 percent or 0.52 million to 2.03 million, and most of them were used for the application of IPO actions.

Market participants said the number of BO accounts has decreased as it was not possible for IPO applicants to maintain many accounts due to the mandatory provision of having a minimum investment of 20,000. Tk in listed securities to apply for IPO shares worth 10,000 Tk each. .

During the year, the first DSE exchange issued 54 new TRECs (commercial law certificates).

The special facility to legalize undisclosed income from stock market investments in the current fiscal year (FY), 2021-2022, has also had a positive impact on the market.

The improvement in the pandemic situation, the extension of the credit facility, the gradual economic recovery and the low interest rate on bank deposits have prompted investors to keep their confidence in the market, Khairul told FE. Bashar Abu Taher Mohammed, CEO of MTB Capital.

He said the corporate tax cut for listed manufacturing companies in the current fiscal year has further boosted investor optimism.

The special possibility of legalizing undisclosed income from stock market investments has also had a positive impact on the market.

He noted that many good issues were still lucrative, but investors should be careful when buying overvalued stocks to avoid any bad luck.

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