The country's stock market has been behaving normally until recently. Though bearish, the market was not that volatile. But the Russian invasion of Ukraine on February 24 last and its impact on the global market triggered a clear panic among investors who started offloading their holdings, although the Bangladesh market is not integrated with the world markets. One can blame the investors' ignorance. They, however, demonstrate this trait (?) often, and a few cunning people exploit the same to their advantage.
The market lost around 500 points since the outbreak of the Russia-Ukraine war. It was the worst on Monday. The Dhaka bourse's main index---DSEX --- had shed over 182 points on that day. That was the largest fall in two years. The decline made the securities regulator nervous. It could not wait any longer as it lowered the circuit breaker limit to 2.0 per cent from 10 per cent to stop the freefall of the stocks. On Wednesday, the top notches of the Bangladesh Securities and Exchange Commission (BSEC) held a meeting with the chief financial officers of the listed banks urging the latter to make a fresh investment in the stock market.
Some experts have raised questions about the hurried intervention by the regulator, saying that the fall in stock prices is nothing unique to the Bangladesh market. Markets have been falling across the globe following the outbreak of the Russia-Ukraine war. In the Bangladesh market, though not integrated with the global market, the fall has been sympathetic. The market needs a process that facilitates correction of prices of over-valued issues, they feel.
One also needs to remember the prevailing overall price situation in the country. No matter what the national statistical organisation---the Bangladesh Bureau of Statistics (BBS) --- says about the rate of inflation, the people have not encountered such a situation in recent memory. The long queues before the TCB trucks selling essentials at subsidised prices highlight the plight of the poor and low-income people. The middle class is also in deep trouble, but they have to hide many things.
Small investors still dominate Bangladesh's market. The hardship they are facing now because of the soaring prices of essential commodities is forcing them to withdraw their investment, in part or full. The process of withdrawal started some weeks back, and it has got pace following the outbreak of the war. Intervention might stall the fall, but it is unlikely to reverse the trend sustainably.
Certain developments at the country's bourses often give rise to questions. Why on earth would indices nosedive on a particular day and skyrocket after a day's gap with no change in the situation on the ground?
The DSE main index dropped 182.18 points on March 07 last and the same soared 155.73 points on March 09. The BSEC had only enforced a circuit breaker to stop the slide. Interestingly, the market got a shot in the arm by the regulatory move and soared. All these appeared unnatural.
A stock market is a sensitive place where investors' confidence is the key factor. Actions/moves by all the stakeholders do always help build that confidence.
This is an area where there are deficiencies and, hence, a crisis of confidence.
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