‘Good times’ in markets

After three dismal years, the stock market in Bangladesh was looking up again with domestic and foreign investments on the upswing.

The index and trading at Dhaka Stock exchange has been going up for the past few months.

More and more investors are turning up at the brokerage firms to invest.

The DSE general index has gone up nearly 15 percent to reach 5,238 points in the 24 working days since Sept 1. Trading during this time never went below Tk 5 billion.

DSE’s new index launched 21 months ago crossed 5,000 points for the first time on Sept 25.

“There is more cash flow in the market. Local and foreign investors are coming in, so transactions and the index have gone up,” Swapan Kumar Bala, managing director of DSE, told bdnews24.com.

According to DSE data, total foreign investment in the first nine months of this year stood at Tk 20.13 billion. It was Tk 19.82 billion in the 12 months during last year.

Market analysts believe the rise in foreign investment was generating a positive outlook on the bourses.

The market was heading downward after the crash in 2010 until end of 2013.

Transaction came down to Tk 1 billion as the index fell, causing stagnation in the market.

The government, market regulating bodies and business representatives discussed several times to find a way out of the standstill and rejuvenate the market.

A stimulus package for small investors who suffered in the market crash was worked out on and various incentives were offered to institutional and foreign investors.

Those moves are now showing positive results.

DSE Director and former president Shakil Rizvi said: “Flow of foreign investment mainly explains the rise in the index and is reflected in the growing volume of transaction. More local investors are entering the market because of low interest on bank deposits.”

The interest rate for bank deposits in August was 7.72 percent, the lowest in the past 20 months. Cash flow in the market also increased in the past when interest for deposits fell.

The cash flow into the bourses went up for the same reason, said Bala.

“The fund managers through whom foreign investments are routed are predicting good times for the market. It takes time to get over the memory of a crash. But we got over it.”

The rate of return on investments in the stock market in Bangladesh was more than anywhere else, said Bala. "That was now bringing in more investments."

Shakil Rizvi said political stability also regenerated investor's confidence and they returned to the market despite fall in share prices.

DSE RSI (Relative Strength Index) was over 90 due to buying pressure last month. Market experts advise caution in buying shares when RSI goes above 70.

“There will be rise and fall in the market, said the DSE director when asked how long would the 'positive sentiment' last. “But it’s not right that everyone will leave the market.”

“The current economic and political situation in the country is proving good for the market. But there will be trouble if situation gets bad and share prices increase irrationally.”