On Wednesday last, DSEX, the main index of the Dhaka Stock Exchange (DSE) gained more than 100 points. The daily turnover was more than Tk 11 billion, one of the highest in recent months.
However, there is no reason for one's heart to leap by all these statistics. The gains came after consecutive decline in both value and turnover at the DSE for days together.
The uptrend is likely to continue for some more days and then a reverse trend, in all likelihood, would set in and all the gains would be wiped out.
This has been more or less the set pattern of trading in the DSE for months after months. But the net result of such a fluctuating market trading is erosion in the DSE indices. During the last one year, the DSE main index lost more than 800 points. On occasions, the daily transaction came down to Tk 4.0 billion or less.
Though stock brokers or asset management companies have ready answers for any market situation, the truth is market is dull and drab and real investors are staying away from the market. The occasional spurt in market activity is suspected to be the handiwork of some behind-the-scene players or, in crude term, manipulators.
The market has never recovered from the shock it suffered in 2010. There were occasional market rallies, but those were not sustainable. One way or other those rallies were engineered ones.
One ugly feature of the market is strong prevalence of rumour-mongering. Despite its damaging effect on the market, none, including the capital market regulator, has made any effective move to drive out the rumour-mongers from the market.
In many cases, investment is not made in any stock, taking into cognizance the fundamentals such as net asset value (NAV), price-earnings ratio, business performance. Investors, though very limited in their numbers, are lured more by new issues and rumours. Application of whims is often observed in investment decisions.
The development involving the prices of Monno Jute Stafflers could be a glaring example how rotten the affairs are now in the stock transactions.
With an earning of Tk 1.43 per share, price-earnings ratio (PE) at more than 6832, net-asset value at around Tk 49 and dividend rate (2017) 15 per cent (stock), the Monno Staffler (face value of stock is Tk 10 each) is now being quoted at an unbelievable price of Tk 3474. Moreover, the turnover of the company reduced by almost half in 2017.
The price comes in contrast with that of a stock---the British American Tobacco, Bangladesh (BATB) --- that remains at the top of the table of blue chips. With an EPS of about Tk 46, PE ratio at 25.83, NAV at over Tk 431 and dividend 600 per cent (cash), the BATB stock is now being quoted less --at Tk 3337--- than that of Monno!
There are a few other stocks the prices of which are unreasonably high. The regulator seeks information from the companies concerned whether they have any price sensitive information and answer, invariably, comes in the negative. Yet high prices of most of these stocks persist.
Why should informed and long-term investors venture into a market that is dominated by rumour-mongers and small-time manipulators? Besides, with banks performing poorly and most good stocks remaining overpriced, not much option is now left for real investors.