Vol. 5 Num 923 Sun. December 31, 2006  

Stocks weather political turbulence in 2006

The overall capital market scenario looked stable throughout the year 2006 despite political uncertainty especially at the fag end.

It showed some signs of resilience and maturity overcoming many ups and downs in indices and turnover, analysts and observers said.

The political unrest that persisted in the later part of the year has thrown the capital market into a bearish mood. Also, the then government's tightened monetary policy has eaten into market turnover and indices in the second quarter of the year ending today.

Although the stock market's seesaw movement left the general investors nervous on several occasions, insiders and market officials claimed that they did not experience abrupt fall or rise in indices in a large number and the market proved resilient to external shocks.

Higher interest rate on savings certificates as well as liquidity crisis in the money market during the second quarter of the year and the political tensions during the last quarter took some tolls on turnover values and share prices, said Chief Executive Officer of Dhaka Stock Exchange (DSE) Salahuddin Ahmed Khan evaluating the capital market in 2006.

"But, virtually the market remained stable," he said, adding that the scenario could be far better, if the market was not depressed in the later part of the year due mainly to political uncertainty.

He said both the primary and secondary market were vibrant as the institutional participants, who are considered to be major players, were much active.

The investors also had faith in new initial public offerings (IPOs), the DSE CEO further said. Besides, offloading of shares by the two government power entities -- Dhaka Electric Supply Company (Desco) and Power Grid Company of Bangladesh (PGCB) -- through the Direct Listing Regulations 2006 also got positive response from the investors.

Salahuddin also said the DSE set a milestone on November 22 as the securities market capitalisation crossed Tk 300 billion mark. The massive achievement was mostly due to listing of shares by some companies under power, bank and leasing sectors encouraging the securities market to grow further, he added.

The DSE top official said the proposed Bangladesh Bank guidelines for the large companies seeking loans from banking system will act as stimuli for the capital market.

When implemented, such a policy will induce the businesses and industries to finance a portion of their capital needs from the securities market, he said.

Like the previous year, the secondary bond market, which was introduced in the bourse on January 1, 2005, remained dysfunctional in 2006.

The market absorbed seven new issues, which raised around Tk 177 crore from public through IPO. Most of the IPOs were oversubscribed.

The oversubscription of IPOs proves that investors did not lose their confidence in the capital market, according to the analysts.

The companies that issued IPOs in 2006 are Jamuna Bank Ltd, S Alam Cold Rolled Steels Ltd, LankaBangla Finance Ltd, Bangladesh Industrial Finance Company Ltd (BIFC), Industrial Promotion and Development Company of Bangladesh Limited (IPDC), Brac Bank and Prime Islami Life Insurance.

Of the IPOs issued in 2006, five got listed both on the DSE and Chittagong Stock Exchange (CSE). The rest two companies -- Brac Bank and Prime Islami Life Insurance -- will be listed on the bourses in January 2007.

Of the 310 securities listed on the DSE, 158 companies and mutual funds declared dividends, 52 issued bonus shares and six declared rights shares.

Trading took place in 228 days on DSE and a total of 832,705,299 shares worth Tk 65,079,115,512 were traded. The highest turnover in a single day was Tk 809,274,385, highest after 1996's bubble and bust, while the lowest was Tk 77,067,509.

The prime indicator, DSE General Index, showed 3.61 percent fall at the end of year to close at 1609.51 points on December 28, the last trading day of the year, starting with 1669.79 points on January 1, 2006. The index rose to the highest 1712.49 points on January 15 while the lowest was 1294.04 points on June 6.

The DSE 20 Index, which comprises blue chips, also declined by 11.98 points to close at 1406.35 points on the last trading day starting with 1597.86 points on the first trading day of 2006. The index rose to the highest 1604.88 points on January 8 while the lowest was 1261.7 points on June 15.

However, DSE All Share Price Index went up by 3.38 percent to close at 1321.39 points on December 28 beginning with 1272.67 points on January 1, 2006. The index reached highest 1349.77 points on September 13 while the lowest was 1003.79 points on June 15.

Evaluating the capital market in 2006, CSE Chief Executive Officer Ghulam Faruque, who is stationed in Dhaka, said the overall situation was well with banking stocks' good performance.

He also said the political uncertainty at the year-end could not affect the market significantly.

As the contract of former chairman of Securities and Exchange Commission (SEC) expired on February 22, career bureaucrat Faruk Ahmed Siddiqi took over as the new chairman of the capital market regulatory body on March 15.

The SEC in January launched guidelines on corporate governance for the listed companies to establish corporate accountability and transparency.

In the first quarter, a group of small investors took to the street twice staging demonstration in front of the DSE building as the premier bourse's share indices went down significantly.