Stocks extend slide on market exposure concerns

The Dhaka and Chattogram stock market indices fell further on Sunday as concerns over the capital market exposure of non-bank financial institutions (NBFIs) resurfaced among investors.

DSEX, the general index of the Dhaka Stock Exchange (DSE) fell 0.93% to 6,926 points, after falling 0.7% on Thursday.

“Most of the investors preferred to sell their holdings due to the recent circular from Bangladesh Bank regarding the exposure of NBFIs to the capital market, according to EBL Securities’ daily market commentary on Sunday.

Last week, the central bank issued a clarification outlining what should and should not be treated as NBFI capital market exposure.

Stock brokers said the central bank hadn’t changed anything in this regard, but investors reacted negatively as it watered down a recent rumor that had helped boost their optimism.

Rumor had it that the central bank had received verbal orders to reduce the banking sector’s exposure to the capital market.

The central bank’s attitude towards the capital market exposure of its regulated entities emerged as an important psychological factor among equity investors, as they observed selling pressure as soon as the bank central bank opposes the overexposure of banks to capital market instruments.

Recently, Bangladesh Bank has also asked the Bangladesh Securities and Exchange Commission to rule on too many unrealized loans from NBFIs to their subsidiaries in capital markets which are included in their market exposure.

It also added to short-term investor concerns, stockbrokers added.

Investors embarked on an aggressive sell-off as soon as the DSEX broke through the psychological 7,000 point threshold on Thursday, as they feared the bearish momentum was building.

Of the 385 issues traded at the DSE, 77 advanced, 270 declined and 38 remained unchanged.

Amid increased selling pressure, daily revenue in DSE rose 8.3% to Tk 1,140 crore.

Sector-wise, tannery emerged as the most traded sector in the DSE with a 23% contribution to daily turnover, while the pharmaceutical and mechanical sectors contributed around 10% separately.

Most sectors suffered a price correction. Among them, the IT, NBFI and life insurance sectors led the fall on Sunday. On the other hand, the market capitalization of the jute sector gained more than 4%.

The Chittagong Stock Exchange indices also fell into red territory. The broad CSCX index fell 140 points to 12,144.

Daily turnover at the port city stock exchange increased from Tk 34.7 crore to Tk 37.6 crore.

Garland K. Long