Published: Wednesday, April 3, 2013

Editorial

Investor confidence on the wane

Markets turn bearish

The Dhaka Stock Exchange reached a new low on April 1 when the general index came down to 3,610 points, losing 3.6% overnight. This is the lowest point reached over a 13-month period and analysts have stated there is little possibility of any major revival anytime soon. This is hardly surprising. The sustained political uncertainty the country is experiencing coupled with the fact that most companies have declared disappointing yearly dividends  the double-effect of these two factors have done little to inspire investors’ confidence.
It is little wonder that most investors are in the process of selling out stocks and shares. With no end in sight of the violent turn in politics, and no surety that a negotiated settlement to the current impasse in sight, many players in the market are shying away from trading altogether. With politics playing havoc with productivity, it is natural that profitability of listed companies has taken a hit. Banks have traditionally paid out the highest dividends. Getting a bad return on investment is bad enough. Taking into account the gradual slowdown of the economy  sector by sector is indicative of things to come. This year, 14 out of 30 listed banks have declared lower dividends than the previous year. In such circumstances, investors’ cannot be blamed for partaking in panic selling that has helped dip the bourses.
Only the return of institutional investors can stabilise the market. Calls have been made for the ministry of finance to take steps to increase liquidity in the market. Yet, regulatory mechanisms alone will not rectify the situation unless the political climate cools down. Unless constructive steps are taken in that direction, no amount of market intervention will help to restore confidence of investors to make fresh investments in a volatile market.