Stocks skid to three-month low

Dhaka stocks yesterday plunged more than 5 percent or 313 points in reaction to the next fiscal year's budget that offered no incentives to the stockmarket.

With yesterday's fall, the Dhaka Stock Exchange General Index came down to a three-month low at 5,676 points. The Selective Categories Index of Chittagong Stock Exchange also plummeted 496 points, or 4.65 percent, to 10,182.

The premier bourse started the day in a negative note and lost more than 200 points in the first hour of trading.

Participation of investors was low due to the 36-hour countrywide shutdown enforced by the main opposition BNP and its key ally Jamaat-e-Islami.

Salahuddin Ahmed Khan, who teaches finance at Dhaka University, said, “Stocks declined as the investors reacted negatively to the proposed budget, which had no incentives for the capital market.”

The government also stopped investment tax credit opportunity for the investors, which too negatively impacted the investors and market operators, said Khan, also a former chief executive officer of DSE.

Khan said the proposal to increase tax on commission of brokerage houses also created a negative impact.

Akter H Sannamat, former managing director of Prime Finance and Investment, said: “The proposed budget has failed to fulfil the expectation of the investors, as there was no indication of liquidity management in it for the capital market.”

The fact that there are no incentives for the capital market pushed down investor confidence, said Sannamat.

He said the budget is fully dependent on borrowing from the banking sector. As a result, the capital market will face credit dearth in the next fiscal year.

Sannamat also said no indication of offloading shares of state-owned enterprises also dented investor confidence.

The government could have given another chance of investing 20 percent of undisclosed money in the stockmarket, he added.

Doubling the tax on commission of brokerage houses dealt a blow to the investors' spirit, as they pay the levies to the houses, said a market operator.

A DSE official also attributed the fall to the government's budgetary plan for the next fiscal year that denied black money-holders the scope to invest their untaxed money in the market.

Most of the investors shied away the market, as they were wary of any major slide in the prices of shares, he added.

Both stock exchanges have already urged the government to reconsider the budgetary proposal of doubling tax on brokerage commission.

Of the total 259 issues traded on the DSE floor, 252 declined, five increased and two remained unchanged. Turnover stood at Tk 596 crore, down by 10.49 percent from Thursday's trading.

All the sectors lost: bank 6.9 percent, non-bank financial institutions 5.3 percent, telecommunications 4.9 percent, pharmaceuticals 2.8 percent and fuel and power 4.3 percent.

United Commercial Bank topped the turnover chart with a turnover value of Tk 35.6 crore.

IBBL Mudaraba Perpetual Bond was the biggest gainer of the day, posting a 0.30 percent rise, while Pubali Bank was the worst loser, slumping by 9.58 percent.