Mid-cap drug makers lose, wiping out much of market value

Overall stock market sees 0.42pc correction in 3 months to Feb 16

| Updated: February 21, 2023 08:27:06

Mid-cap drug makers lose, wiping out much of market value

The pharmaceuticals and chemicals sector lost over 6.5 per cent in market capitalisation to Tk707.6 billion in the three months through February 16 this year, at a time when a good number of stocks on the Dhaka Stock Exchange have been languishing at floor prices.

Though it is the second highest fall in market cap during the time, its contribution is more than any other sectors to the decline of the total market cap since the pharma sector has the highest market share at 9.26 per cent.

The pharma sector's market value eroded mainly because of price corrections endured by mid-cap stocks, such as Central Pharma-ceuticals, ACI, and Navana Pharmaceuticals.

The sector leaders -- Square Pharmaceuticals, Renata, and Marico Bangladesh - made little impact on the decline in market value.

Central Pharmaceuticals fell 17 per cent, ACI 5 per cent, Navana Pharma-ceuticals 9 per cent, and Orion Pharma 9 per cent during the period.

Central Pharmaceuticals had reduced its year-on-year loss in October-December, 2022 while ACI and Navana Pharmaceuticals experienced a decline in their earnings for the period compared to the same quarter in the previous year, according to disclosures made by them.

Officials of IDLC Investments said quarterly performance might be one of the reasons behind the price corrections.

Big stocks -- Renata and Marico Bangladesh -- remained unchanged at floor prices of Tk 1217.90 and Tk 2421.50 per share since November 17 last year.

The share price of Square Pharma closed at Tk 210.80 on November 17, 2022 and then exhibited ups and downs for seven sessions before settling at the floor price of Tk 209.80 on November 29. The stock continued to be traded at the price until Thursday.

The shares of Beximco Pharmaceuticals saw price correction by 3 per cent in the last three months to close at Tk 146.20 each on Thursday.

The big cap stocks did not move up much from the floor prices on the prime bourse even if their quarterly performance was better than small- and mid-cap stocks, which is why the price corrections of a few stocks pulled down the overall market value of the pharmaceuticals sector in the three months' time.

Two other major sectors -- engineering and fuel & power -- saw marginal corrections at 0.49 per cent and 0.61 per cent during the period when the broad index of the premier bourse lost 19 points to 6246, with the price movement restriction in place.

The overall market capitalisation came down 0.42 per cent to Tk 7.64 trillion in the three months through Thursday.

Telecommunication remained unchanged in terms of market capitalisation; all three companies comprising the sector witnessed no price correction during the period mainly because of floor prices.

Grameenphone, Robi Axiata, and Bangladesh Submarine Cable Company have been traded at Tk 286.60, Tk 30 and 218.90.

The textile sector having the highest number of listed companies saw the second highest market value erosion over the last three months.

Of the companies which dropped on the Dhaka bourse, HR Textile declined 9 per cent, Pacific Denims 14 per cent, Alltex Industries 26 per cent, and Dacca Dyeing & Manufacturing 22 per cent.

Amid the gloomy picture, the insurance sector saw the highest appreciation of market value at 7.88 per cent in the three months on the DSE.

Some of the insurance stocks recorded unusual price hikes in recent times, and in reply to queries by the regulator they said there was no undisclosed price sensitive information behind the increase in share prices.

Asked about the price appreciation witnessed by life insurers, Asif Khan, chairman at Edge Asset Management, said the sector had exhibited a rally in 2020 based on speculation.

"The indicators normally used to gauge the performance of other sectors are not applicable to the insurance sector," he added.

The banking sector also appreciated 1.65 per cent in market capitalisation during the time. Some bank stocks advanced marginally while others remained unmoved.

Islami Bank Bangladesh, One Bank, Premier Bank, Prime Bank and Pubali Bank advanced moderately.

Due to low market prices, many banks, such as Premier Bank and Prime Bank, ensured high dividend yields last year.

The service sector that has the least market share slid 7.33 per cent due to price correction of Summit Alliance Port and Samorita Hospital. The share prices of these two companies fell 13 per cent and 7 per cent.

In the sluggish market, only a handful of stocks swung on the bourses and more often than not there was no explanation behind the big jumps or plunges. As investors, who invest on large, fundamentally-strong stocks, mostly keep their money in those for long terms, everyday transactions of such shares are low.

The floor price further dwindled the trading of such shares. This is the backdrop to the dominance of speculative investments through which some investors look to make short-term gains.

"It's difficult to speak about price movements caused by speculative investments," said Md Moniruzzaman, managing director of IDLC Investments.

[email protected]

Share if you like

Filter By Topic