The stock market yesterday suffered its steepest single-day decline in 12 months as worried investors went for a massive selloff fearing a freefall after the government brings back strict measures to curb the sharp rise in coronavirus infections.
The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), dropped 181 points, or 3.44 per cent, to 5,088, the lowest level in three months.
On March 16 last year, the key index plunged 196 points because of the spread of the virus in the country.
People are panicked, so they are selling shares, said Yawer Sayeed, chief executive officer of AIMS Bangladesh, an asset management company.
“The pandemic situation is deteriorating fast, and I prefer to remain in the black,” said Nahid Niaz, a stock investor.
Prof Shibli Rubayat Ul Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), said the stock market did not shut all over the world when the economy remained open.
“We can’t stay detached from the world, so we will not shut the market,” he said at a programme of the Capital Market Journalists Forum yesterday.
In the afternoon, the BSEC set the new trading session from 10:00am to 12:00pm, instead of 10:00am to 2:00pm now. The new trading hour comes into effect today.
Yesterday, the central bank reduced banking hours in tune with the new restriction on movements. Clients will be allowed to settle financial transactions from 10:00am to 12:30pm on regular working days.
“The Covid-19 crisis is not going to evaporate shortly. So, we will have to run our economy and the stock market in this new situation,” Prof Islam said.
“Trading is not tough because investors can place orders digitally.”
The market drop is not for Covid-19 and the lockdown; rather, it is the culmination of a few things that have been prevailing in the market for years, according to Yawer Sayeed.
Confidence crisis and fundamental problems were the main reasons for the fall, he said.
Sayeed said the market was a debt-based one rather than savings ones. People invest in the market by taking loans, and lenders get the incentive from the government, not the investors, he clarified.
“So, people want to keep cash in their hands. Some are trying to save their portfolios from forced sales.”
If investors buy shares on margin loans and the price of the share falls below a certain level, the lenders sell the securities to save the investment.
“If it were a savings-based market, people would not sell shares as the market would remain open and the business activities would not shut. So, this is clear that they are not selling shares just because of Covid-19,” the asset manager added.
A stockbroker said the market was falling due to panic. “Many investors think that the market will fall further. This tendency is contagious and leads to massive selloffs.”
The investors should realise that the market would bounce back soon, and they should not sell the shares of good companies, he said.
Turnover, an important indicator of the market, rose 15.52 per cent to Tk 521 crore from Tk 451 crore in the previous session.
At the DSE, only seven companies advanced, 251 declined, and 66 remained unchanged.
Beximco Ltd topped the turnover list, with its shares worth Tk 70 crore changing hands, followed by Robi Axiata, Beximco Pharmaceuticals, Asia Pacific Insurance, and LankaBangla Finance.
Paramount Insurance shed the most, giving up 12 per cent, followed by Dominage Steel, Golden Son, IFIC Bank, and SS Steel.
The Chattogram Stock Exchange also witnessed a massive fall. The CASPI, the general index of the bourse in the port city, dropped 542 points, or 3.55 per cent, to end the day at 14,714.
Among the traded stocks, 13 rose, 184 dropped, and 19 remained unchanged.