Turnover at DSE spirals on budget measures
The Dhaka Stock Exchange yesterday recorded its highest turnover in a decade, as the ongoing bull run seems to have gotten an added impetus from the proposed budget measures for the incoming fiscal year.
A sign of the level of bustle in the bourse, the turnover stood at Tk 2,669 crore, up 22 percent from the previous session on Thursday.
On December 6 in 2010, the turnover, which is the ratio of the value of total shares traded to the average real market capitalisation, was recorded: Tk 2,710 crore.
Finance Minister AHM Mustafa Kamal in his proposed budget for fiscal 2021-22 extended a 2.5 percentage point-cut in the corporate tax rate for both listed and non-listed companies except for financial institutions, telecom and service-oriented companies.
The corporate tax is a tax on the profits of a company; the amount taken out is from the income after expenses have been deducted.
So the cut means companies will have a bigger share of the profit pie to themselves, which, in turn, potentially means a higher dividend payout for shareholders.
"The budget had a positive impact on the market," said Shahidul Islam, chief executive officer of VIPB Asset Management Company.
Companies that report their true profits will see their share prices soar as a result, he added.
The proposed budget has nothing negative for the bourse, so the bull market continues, said Ahmed Rashid Lali, former president of the DSE Brokers Association.
A bull market is a market that is on the rise and where the conditions of the economy are generally favourable.
Since April 21, DSEX, the key index of the DSE, has been on the rise, gaining 11.3 percent and crossing the 6,000 point-mark along the way.
Yesterday, it closed at 6,038, down 0.25 percent from the previous session, which had recorded a four-year high.
Turnover more than trebled since April 21, when it stood at Tk 776.7 crore.
Given the positive moves the current management of the stock market regulator has taken since taking charge in May last year to safeguard the interests of retail investors, the general public is now considering the bourse as an option for parking their funds in the face of low interest on bank deposits, according to brokerage houses.
As of March, which is the latest available data of the Bangladesh Bank, the weighted average interest rate on deposits stood at 4.4 percent, in contrast to 5.5 percent a year earlier.
In 2020, Bangladesh's capital market yielded returns of 21.3 percent, the highest among the bourses of Asia's emerging economies, according to LankaBangla Securities.
On March 19 last year, the Bangladesh Securities and Exchange Commission had imposed a floor price on stocks as markets all over the world were on a freefall as news emerged of the fatal nature of the rogue pathogen from Wuhan, China that was running amok all over.
From April, the stock market regulator has started to lift the floor price in phases. In the first phase, the floor price of 66 companies' shares was withdrawn, and in the second phase, 30.
This also added to overall positive sentiment in the market, according to analysts.
All types of investors, both general and institutional investors, have been participating in the market in the last few months, said Khairul Bashar Abu Taher Mohammed, CEO of MTB Capital, a merchant bank.
And investor participation particularly rose yesterday because they approve of the budget for fiscal 2021-22, he said.
Mohammed went on to caution investors of over-valued stocks.
For instance, prices of most of the insurance stocks doubled in the last three months though their profit growth was insignificant.
Yesterday, the engineering sector gained the most -- 3.9 percent -- after the finance minister proposed tax exemption for the local engineering sector.
Of the top 10 gainers chart, four were from the engineering sector.
"Investors are hoping this sector's profits would be high," said Mohammed, also a former secretary-general of Bangladesh Merchant Bankers' Association.