Stock market transactions are increasing as the national election draws near. Transactions in the country’s leading bourse Dhaka Stock Exchange (DSE) exceeded Tk 10 billion last Thursday, the highest since last 11 July.
Market analysts think, political factors, alongside economic ones, are behind this soar in the market. The government is trying to boost the market ahead of the general elections to appease the general investors.
The stock market plunged twice, in1996 and 2010. Both times Awami League was in power. As the investors are still reeling from the 2010 share market debacle, the government does not want to irk the investors further ahead of the election.
Inclusion of Chinese consortium as a strategic partner of DSE, and declaration of bonus and dividends from the enlisted companies after June fiscal year, have also played a vital role in this transaction boom.
Amidst the transaction increase, DSEX, the benchmark index of the premier bourse, has remained static. The index is revolving around 5500 points for quite some time now. It decreased on Thursday from the previous day to 5500 points.
Market analysts say, prices of the companies which can influence changes in general index are static, that’s why the overall index is not soaring much. Prices of some low-capital companies, however, have soared unusually.
According to DSE sources, the index was 5322 points in the beginning of current fiscal year. The index increased 178 points around the last two and half months. The transaction was Tk 7.85 billion last July what has increased to Tk 10.65 billion in last Thursday.
The Chinese consortium of Shenzhen and Shanghai stock exchanges on 4 September joined the DSE as strategic shareholder through purchasing 25 per cent shares. The consortium earlier deposited around Tk 10 billion to the DSE bank account as the share price.
Finance minister AMA Muhith on Wednesday announced the tax benefit at the silver jubilee celebrations of Bangladesh Securities and Exchange Commission (BSEC). The incentive has also influenced the transaction boost.
Asked, former commissioner of BSEC Arif Khan told Prothom Alo, the finance minister’s announcement of tax benefits clearly indicates that the government is eager to improve the stock market.
Moreover, the general investors are also hopeful that the market will improve ahead of general election, he added.
Investment withdrawal from foreign investors
On the flipside of the rosy scenario of the market, the foreign investors are withdrawing their shares from the market since May. The foreigners have sold shares amounting Tk 1.82 billion in August while they invested Tk 1.76 billion within this span of time. But this withdrawal has not dented the market as foreign investment is less compared to local investment.
Though foreign investment has declined, local institutional and personal investment has increased. This is because interest rates on deposits in the banking sector have decreased, according to former caretaker government advisor AM Mirza Mohammed Azizul Islam.
According to DSE, institutional investment in better companies has increased in last couple of months. The institutional investment in 19 companies among the blue chip DS 30 has increased by this time.
Dhaka University’s economics department teacher Muhammad Helal said the regulatory bodies want the market to be stable ahead of the general elections. Thus, regulatory bodies are not taking any measures against the company whose share prices are increasing abnormally. Some market manipulators are using this lax attitude of the authorities for their own gain.
Recently, prices of some Z category shares have seen sharp rises. The regulatory authorities had decided that four companies will be traded on the spot market due to irrational price hikes.
The companies which were sent to the spot market are Monno Ceramics, Key&Que, Aziz Pipes and Style Craft. The prices of the companies, however, still continue to soar.
The share price of Monno Ceramics increased Tk 18, Key&Que Tk 6.5, Aziz Pipes Tk 30 and Style Craft Tk 145 on Thursday amidst the overall price drop.
Besides, a low-cap company with only Tk 130 million capital, Fine Foods, was in second place on the hike on Thursday. The share price soared by 10 per cent.