The country's capital market passed yet another eventful year with a 25 per cent return in the core index of the main bourse despite tussles between the two regulatory bodies concerned over some policy issues.
During the outgoing year 2021, the Dhaka Stock Exchange (DSE) also posted a decade-high daily turnover value along with a rise in market cap to GDP (Gross Domestic Product) ratio.
The daily turnover, an important gauge, stood at Tk 14.75 billion on an average in 2021, up by 127 per cent year-on-year.
The DSE witnessed the second highest-ever turnover worth above Tk 3.54 trillion, posted in 240 trading sessions - executed in the outgoing year.
The DSE market capitalisation to GDP ratio stood at 18.01 per cent, while the market P/E (price earnings) stood at 17.58 at the end of 2021.
Faruq Ahamd Siddiqi, former chairman of the securities regulator, said the market passed a good year, as it saw rise in index and turnover value.
"But manipulation was the weaker side of the market. The share prices of small-cap companies rose abnormally without justified reasons."
He focused on containing manipulation along with increasing the number of quality IPOs.
A consistent rally enabled the DSE broad index - DSEX - to stay above 6,700 points, as buoyancy added strength to the equity indices despite worries over virus-infused shocks to the country's economy in the first half of the year.
The DSEX closed the year at 6,756, surging 1,354 points or 25 per cent year-on-year, on Thursday, the last trading day of 2021. In 2020, the DSEX posted a 21 per cent return.
Strong participation of investors, consolidation of stock prices, comparably high corporate earnings, and low interest rate on bank deposits were the pivotal reasons behind the decent year for the Bangladesh capital market.
While speaking on the market indicators including the return and price hike of small-cap companies, managing director of IDLC Investments Md. Moniruzzaman said the market passed a good year.
"Idle funds, which were injected into the market during the Covid period, came out. So, the challenge of the new year is to keep the investors' participation spontaneous through proper functioning of the market," he opined.
Although stocks of many low-performing companies saw unusual price hike during the year, large-cap firms contributed the most to the index rise.
Major sectors posted hefty returns in the outgoing year, and the heavyweight banking sector saw the highest return with 15 per cent gain. It was followed by pharma with 14.9 per cent, telecom 14.4 per cent, engineering 11.8 per cent, power 9.5 per cent, and food 9.30 per cent.
Many stocks with poor dividend payment records and the hyped-up insurance stocks soared this year too. But their contribution to the index was insignificant, said an analyst at a leading brokerage firm.
Among the low-profile companies, Tamijuddin Textile Mills posted the highest gain of 1,158 per cent, followed by Paper Processing & Packaging 1,140 per cent, Sena Kalyan Insurance 603 per cent, Sonali Life Insurance 485 per cent, and Fortune Shoes 321 per cent.
Banks and some institutional investors poured money in the market. They preferred the stocks with sound fundamentals, which ultimately sent the index to the high level.
The market was consolidating round the year, but the momentum picked up in October. The index crossed the psychological barrier of 7,000 points to reach the record high of 7,367 points on October 10.
Market experts said low return from the money market, several regulatory reforms to build a vibrant capital market, enlistment of some quality IPOs, and undisclosed money investment opportunity in stocks contributed to the substantial growth in index and market turnover.
The market was bullish amid the investors' growing confidence - driven by the regulator's various market supportive measures, which lured the investors to park fresh funds on stocks.
The regulatory initiatives to restore governance in the market and other reforms, including removal of floor price, and re-listing of OTC companies, positively impacted the market.
Introduction of SME board, corporate restructuring, development initiatives for Sukuk and bond market, new initial public offering (IPO) allotment rules, and change of circuit breaker for IPOs contributed towards building a vibrant capital market.
"This current sentiment would sustain, only if we overcome the hindrances of financial indiscipline and shortage of diversified products in our capital market," said a senior official of a leading brokerage firm.
Market capitalisation stood at Tk 5,421 billion, with a 21 per cent surge from the previous year.
The CSE All Share Price Index (CASPI) of the port-city bourse also registered about 26 per cent positive return year-on-year, to finish the year at 19,666.
The Selective Categories Index of the bourse - CSCX - also posted a 25.6 per cent growth to settle the year at 11,813.
The year 2021 was also one the best periods for the bond and IPO markets. Corporate borrowers shifted their eyes to the bond market from the traditional bank loans for their funding needs.
In 2021, the Bangladesh Securities and Exchange Commission (BSEC) allowed 23 institutions to raise Tk 125.73 billion through bonds and Sukuk.
The fund raised through initial public offerings (IPOs) also hit a decade-high in the outgoing year since 2011, as 19 companies raised an aggregate amount of fund over Tk 21.80 billion in 2021.
Of those companies, 14 raised Tk 12.30 billion through IPOs, four banks Tk 2.0 billion through perpetual bonds, and the remaining one Tk 7.50 billion through Sukuk.
Among the IPOs in 2021, Union Bank - a fourth generation private commercial bank - raised Tk 4.28 billion through IPO, which is the largest IPO in the banking sector till date.
Among all sectors, it is the fourth largest IPO after Robi Axiata (Tk 5.23 billion), Grameenphone (Tk 4.86 billion), and MJL Bangladesh (Tk 4.60 billion), according to the DSE data.
However, during the outgoing year, the number of BO (beneficiary owner's) accounts declined 20.29 per cent or 0.52 million to reach 2.03 million, and most of those were used for applying IPO shares.
The market operators said the number of BO accounts declined, as it was not possible for the IPO-seekers to maintain many accounts due to the mandatory provision of having a minimum investment of Tk 20,000 in listed securities to apply for IPO shares worth Tk 10,000 each.
During the year, the premier bourse DSE issued new 54 TRECs (trading right entitlement certificate).
The special facility to legalise undisclosed income in the stock market investment in the current fiscal year (FY), 2021-22, also had a positive impact on the market.
The improving pandemic situation, extended credit facility, gradual economic recovery, and low interest rate on bank deposits inspired the investors to keep their confidence in the market, Khairul Bashar Abu Taher Mohammed, CEO of MTB Capital, told the FE.
He said the corporate tax cut for the listed manufacturing companies in the current FY further strengthened the investors' optimism.
The special facility to legalise undisclosed income in the stock market investment also had a positive impact on the market.
He noted that many good issues were still lucrative, but the investors should be cautious about buying overvalued stocks in order to avert any misfortune.
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