Morning shows the day, so says the proverb, but this does not hold true when it comes to the performance of the Dhaka Stock Exchange (DSE) in the outgoing year.
The DSEX, the benchmark index of the country’s premier bourse, concluded the year, shedding 1,012.32 points,497 points despite a sharp rise in January.
The year 2019 was a complete mess for stocks business and a year of disappointment for the stock market, as the market index, turnover and foreign investment all touched the rock bottom.
After the collapse in 2010, stocks never encountered such a bad time.
There were different kinds of policy supports and massive reforms from the government, regulators and stock exchanges only to go vain to the utter frustration of stakeholders.
A string of policy interventions and regulatory measures aimed at salvaging the moribund stock market failed to fix the capital market, frustrating investors and regulators alike.
On Jan 24, DSEX, broad index of DSE touched the highest peak with 5,950 points but as of December 30 the stock market lost 1,497 points and market value lost Tk 517.32 billion in the year under review.
Former finance adviser to a caretaker government AB Mirza Azizul Islam said: “A lot of reforms took place in 2019. If we cannot identify actual hindrances and fix the system, nothing will be solved in the capital market.”
Mirza Azizul Islam, also former chairman of BSEC, said: “The obstacles which prevented investors from entering the market must be addressed. In this case, a good company has to pay the premium according to their respective eligibilities.”
Apart from lack of confidence in the regulators, investors have been grappling with a number of issues including rising non-performing loans and liquidity shortage in the financial sector.
Other reasons are sell-offs by foreign investors and investors' lack of confidence for long because of disappointing data on major macroeconomic indicators.
Dhaka Stock Exchange Brokers' Association (DBA) President Shakil Rizvi said the market saw downward trend in 2019 as it was bad year for stakeholders and investors.
Shakil, also a new director of DSE, said the investors were grappling with the prolonged bearish trend of the market, liquidity crisis in the country’s financial sector specially leasing firms, and Grameenphone’s tussle with the telecom regulator BTRC.
Meanwhile, a drastic fall in the price of large cap stocks namely Square Pharma, United Power and BATBC contributed to the market remaining on the decline in the outgoing year.
Market analysts and insiders also attributed the yearlong drop in the stock market to confidence crisis.
Distressed macroeconomic indicators and troubled financial sector suffering from liquidity pressure acted as negative factors in the capital market.
What say the statistics
The year started with shining streak amidst post-election buoyancy which caused benchmark index to reach as high as 5,950 points within first 18 trading days of January 2019, a sharp rise of 10.48%.
This hike failed to keep the momentum and by the end of December DSEX closed at 4,453 points or 17.3% fall year-on-year. The market cap fell by 12.33%. Daily average turnover of the year dropped to Tk 480 crore or by 12.7% over last year.
On Monday, the last trading day of the outgoing year, DSEX ended at 4,452.93 points, down by 1,012.32 points from January 1 this year.
The bourses will remain closed today as the last day of the outgoing calendar year is a bank holiday (December 31).
DSE market capitalization declined to Tk 3.4 trillion from Tk 3.91 trillion on Jan 1, 2019.
In 2014, the market capitalization to GDP ratio was at 24%, which came down to 11.16% in October, 2019. The size is the lowest among the emerging bourses in the Asia-Pacific countries.
The ratio was at its peak at 50.67% in 2010, and it slumped to 33.23% within a year after the biggest market crash in the country’s history in 2010-11.
The overall market scenario was also negative in 2019 as investors were discouraged by one issue after another, with the sales pressure from foreigners worsening the scenario.
A Quadir Chowdhury, a stock market analyst, said: “Overall, 2019 was not good for the market. The market was depressed as the overall economy.”
Massive reforms from regulators
The stock market regulator, the Bangladesh Securities and Exchange Commission (BSEC), in July amended a number of security rules on capital raising through initial public offerings (IPOs) and quota facility for the general investors, targeting to revive the market.
The commission in the same month also increased the existing one-year lock-in provision for the placement shareholders to a two-year period to boost the normal business activities of the capital market and lessen the unfair influence of private placement holders.
The stock market regulator also issued a directive two bourses to put 50% circuit breaker on share prices of newly listed companies for the opening two days to prevent their abnormal price movement.
IPO quota facility for the general investors was raised to 50% from existing 40% under the fixed price method while under the book building method it was raised to 40% from 30% to build confidence in the market.
The BSEC decided to allow non-listed firms, bonds and debentures for trading their shares under a new platform called Alternative Trading Board (ATB) and Investment Sukuk Rules, 2019.
In 2019, The Bangladesh Bank eased advance-deposit ratio (ADR) of banks by 1-1.50 percentage point apparently to increase cash flow of banks to kick start gloomy investment scenario for both real economy and stock business.
The outgoing year, the central bank announced in a circular that fresh liquidity support would be given to banks to raise their respective portfolios in the capital market up to the regulatory limit directly or through subsidiaries.
In the period, the DSE and Shenzhen Stock Exchange (SZSE) jointly launched cross-border match-making platform called V-Next, a one-stop pitching mechanism among qualified investors, intermediaries and start-ups to promote the Small and Medium Enterprise Board. Beside, DSE has lunched SME platform.
The current finance bill FY2019-20 fiscal year made a 10% tax on the excess reserve of a publicly traded company exceeding 70% of its paid up capital mandatory.
Professor Mizanur Rahman of the Department of Accounting and Information Systems at Dhaka University said: “All steps taken so far have become ineffective due to a liquidity crisis of financial institutions."