Stocks plunged below the 5,000 point-mark yesterday thanks to massive sell-off by both jittery retail and institutional investors.
The DSEX, the premier index of the Dhaka Stock Exchange (DSE), plunged by 67.30 points, or 1.33 percent, to close at 4,966.44 yesterday, which is the lowest in 31 months.
What started out as a dip in confidence has now turned into a full-on panic: in the last three weeks, the DSEX had 463.6 points and about Tk 27,500 crore wiped out.
The index has sank to such a level that stock brokers and merchant bankers now have to execute “forced sale”.
Investors can take margin loan from merchant banks to buy “A” category shares.
If the price of the securities bought with the borrowed money decreases in value past a certain point, the lenders can legally force investors to sell off some of their assets to save their margin loan.
A managing director of a merchant bank requesting anonymity has acknowledged that they had to go for forced sell in the last two days.
“We had no other option but to sell the shares as the prices of the good stocks are plummeting.”
And in the last few days, “A” category companies were the top losers, he added.
For instance, the top negative contributors to the index were the heavyweights British American Tobacco Bangladesh and Grameenphone, and Square Pharmaceuticals.
“This high level of trading activity amid deteriorating index proves that panic-driven investors are dumping their holdings to avoid further losses,” said UCB capital, one of the leading brokerage houses, said in its market analysis.
Turnover of the premier bourse spiralled 25.91 percent to Tk 464.18 crore yesterday.
The impending liquidation of People’s Leasing and Financial Services, Grameenphone’s regulatory issues and fund shortage in banks continued to take a toll on investor confidence, it added.
A top official of a leading merchant bank said the investors are fearing the index would sink further, so they are washing off their portfolio.
They are keeping the cash in hand from selling their stocks so that they can buy shares at the lower level.
“Such a tendency caused the market to fall,” he added.
Meanwhile, retail investors demonstrated in front of the DSE building yesterday to protest the continuous slide of the DSEX. Of the traded issues, 60 advanced, 277 declined and 16 remained unchanged.
Fortune Shoes dominated the turnover chart with its transaction of 54.37 lakh shares worth Tk 20.094 crore, followed by Square Pharmaceuticals, United Power Generation and Federal Insurance.
First Finance was the day’s best performer with its 10 percent gain, while Emerald Oil was the worst loser, shedding 10 percent. Chittagong stocks also fell with the bourse’s benchmark index, CSCX, declining 115.72 points, or 1.23 percent, to finish the day at 9,257.53.
Losers beat gainers as 216 declined and 48 advanced, while 22 finished unchanged on the Chittagong Stock Exchange. The port city bourse traded 88.25 lakh shares and mutual fund units worth Tk 21.17 crore.