Stocks suffer a huge slump again as DSEX drops below base value

The capital market of Bangladesh is going through a massive slump again after a decade with the main index of Dhaka Stock Exchange down below its base value.

The DSEX lost 417 points or 9.4 percent in the first eight working days of the new year with 87 points shed on Tuesday to 4036. During the launch in 2013, its base value was set 4055.

The premier bourse saw Tk 1 trillion wiped off its market capital in a year while Price-to-Earnings Ratio or P/E Ratio has hit the worst level.

The situation has forced small investors to take to the street. They defied police obstacles to demonstrate outside the DSE in Motijheel.

“Some people have manipulated the market to bring it to this situation putting our backs against the wall. We all have gone broke. The investors have no confidence in this market anymore,” Mizanur Rashid Chowdhury, president of the Investors’ Unity Council, told bdnews24.com.

Finance Minister AHM Mustafa Kamal has called an urgent meeting of the capital market stakeholders at the ICB offices in Motijheel on Jan 20.

Out of the 359 listed companies and mutual funds, 93 are trading below the face value of Tk 10, with more than 50 shares priced below Tk 5 now.

The fall has pushed DSE’s P/E Ratio down to 10.71. The ratio had been 13.68 in 2012 and 12.07 even after the 2010 crash.

The ratio is used for valuing companies by measuring their current share prices relative to their Earnings Per Share or EPS.

Analysts use it to calculate risk by judging whether the market is overvalued or undervalued.

“I’ve never seen such low P/E ratio of the market,” Ahmad Rashid Lali, a former president of DSE Brokers’ Association, told bdnews24.com.

P/E ratio below 11 means a “worrying” situation for a market, according to him.

The Grameenphone-BTRC audit demand issue coupled with liquidity crisis has caused the situation, he said.

The authorities are struggling to find a way out while foreign investors are leaving the market by selling off their shares, he added.

Besides the audit demand issue, Shanta Asset Management CEO Emran Hasan also blamed fears of devaluation of taka against US dollar and the bad state of the economic indices for the situation.

He recommended boosting investment by implementing the caps of 9 percent lending rate and 6 percent interest on bank deposits, lowering government borrowings from the banks and putting an end to money laundering in the guise of import.