Published: Thursday, March 7, 2013

Shutdowns cast gloom over economic outlook

LankaBangla survey predicts GDP is unlikely to grow faster than last year; stockmarket will be a major casualty

Shutdowns cast gloom over economic outlook

Political instability poses the biggest risk to the economy and the capital market in 2013, said a recent survey of stock market stakeholders.
Some 80 percent of the respondents in the survey conducted by LankaBangla Securities, a top broker, expressed grave concern over the ongoing political turmoil, which leads to frequent dawn-to-dusk shutdown of business activities.
The country has already gone through 11 days of shutdowns since January.
A total of 49 persons from 42 institutions participated in the survey conducted in January 2013.
Over half of the respondents — ranging from regulators to traders, academicians to business journalists, and fund managers to individual investors — expect the economy to grow at roughly the same pace as last year.
While 27 percent are optimistic that the GDP growth rate would be higher than last year’s 6.3 percent, local infrastructural bottlenecks might get in the way.
Over at the capital market, 49 percent of respondents ranked political instability as the biggest risk to the stockmarket in 2013, according to the survey.
The lack of investor confidence (29 percent) and weak regulatory framework (10 percent) are likely to pose considerable risk during the year.
Nonetheless, 53 percent are expecting a “moderately” bullish capital market in 2013, with textiles and financials (both 24 percent) tipped to outperform the other sectors.
Utilities (22 percent) and cement (16 percent) are expected to be strong performers as well.
In terms of asset class, equity (43 percent) is expected to be the runaway performer, followed by saving instruments and real estate, with both receiving 18 percent votes each.
Only 10 percent of the survey participants predicted either gold or bonds to outperform in 2013.
Most of the respondents (72 percent) want to concentrate on mid- and long-term — rather than short-term (20 percent) — investment strategies in 2013.
The stockmarket is expected to react the most to earnings performance of listed companies (39 percent), followed by political development (31 percent) and broad macroeconomic factors (20 percent).
Meanwhile, some 41 percent of the respondents expect the local currency to continue to appreciate against the US dollar in 2013; 33 percent anticipate the taka-dollar conversion rate to stay the same as last year.
Regarding Bangladesh Bank’s policy stance in 2013, almost half of the participants (49 percent) think that the central bank will stick to its existing policy, while 18 percent is hopeful of a relaxed monetary policy.
Some 45 percent of the respondents are anticipating a rise in inflation, with 16 percent suggesting otherwise.
The liquidity situation is tipped to take a turn for the better in 2013 by 41 percent, while 20 percent is sceptical that it will happen.
The Dhaka Stock Exchange declined 19.74 percent last year and ranked the third worst performer in the world in 2012, Bloomberg data showed.

Almost half of the participants (47 percent) blame the lack of investor trust and poor corporate governance of listed companies.
Weak economic conditions and high cost of liquidity and regulatory failures also contributed to the drab performance in 2012, raking in 21 percent and 18 percents affirmations respectively.
Going forward, the respondents demand improved transparency of financial reporting and other corporate disclosures (45 percent), improved enforcement of existing rules and regulations (23 percent) and improved corporate governance practices (16 percent), for a robust stock market.
A wide majority (74 percent) considers the Bangladesh Securities and Exchange Commission ill-equipped to effectively regulate market operations.
A staggering 98 percent of the investment stakeholders believe that local traders lack the qualifications to take knowledge-based investment decisions, thereby giving rise to market volatility.
Financial projections through equity research publication would improve the situation, 90 percent of the respondents said.
Of the 49 participants, 33 percent were asset/fund/portfolio managers, 12 percent merchant bankers and 12 percent research analysts.