BB’s surprise repo rate cut fails to cheer up stocks

The stock market ended flat on Wednesday, a day after the central bank cut the repurchase (repo) rate by 75 basis points to 6 percent -- the first move since January 2016.

The market opened higher in the morning, but trimmed gains at the end of the day as risk-averse investors went for booking profits.

The DSEX, the key index of the DSE, rose 2.76 points or 0.04 percent to close at 5,793, retreating from the day’s high of 5,835.

The blue chip DS30 index was marginally up by 1.25 points or 0.05 percent to close at 2,167. The DSE Shariah Index (DSES) slipped 2.37 points or 0.17 percent to 1,348.

CSCX, the benchmark index of Chittagong Stock Exchange, declined 3.84 points to 10,784. 

A sharp decline in banking stocks, the index heavyweight, made the day's rally marginal.

The major losers were the banking stocks battered on above expected cut in the key policy rate. Most of the banking stocks ended lower following the rate cut. Of 30 banks, only nine banks closed in the positive terrain with a fractional rise. Only one bank—BRAC—gained 1.5 percent to Tk 16.6 a share ahead of its annual report.

On Tuesday, Bangladesh Bank cut its benchmark policy interest rate by 75 percentage point to 6 percent from 6.75 percent. It will take effect from April 15.

The central bank took the move to tackle a shortage of liquidity in the money market and boost cheaper loans. The repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any fund shortfall.

Analysts criticised the BB’s move to reduce the repo rate saying the action was made on political consideration to facilitate some banks burdened with NPLs (non-performing loans).