 | DSE plunges on news of MF uncertainty
14 March, 2011
The general index of Dhaka Stock Exchange on Sunday plunged by 459.65 points, or 6.92 per cent, after a week of bull run as investors once again turned nervous and went for mass sell-offs following the news that the creation of Tk 5,000 crore mutual fund for stabilising the capital and money markets had become uncertain.
Trading on the Dhaka bourse started amid a negative mood on the first day of the week, with DGEN, the benchmark index of the bourse, losing around 190 points in the first five minutes of trading.
After fluctuating for about 20 minutes the DGEN curve had continued to go down until the end of the day, closing at 6,179.52 points, as panic spread fast among the retail investors.
Out of the total 255 issues traded on the day, 245 declined, and only 10 advanced.
The day’s turnover also decreased to Tk 1,266.63 crore from that of Tk 1,492.95 crore on Thursday.
Market operators said investors became panicked once again after the news spread that there was uncertainty in creation of the proposed Tk 5,000-crore Bangladesh Fund by the Investment Corporation of Bangladesh and nine other state-run financial institutions.
Retail investors went on a selling binge, fearing that the fund might not
be floated on the market and due to the prevailing liquidity crunch share prices will slide again, they said.
Some of the investors, who had purchased shares when the prices were low, also went for profit-taking sales, they added.
Dhaka bourse had seen a strong rebound in the past week, with the DGEN gaining 1,210.78 points and the investors apparently regaining confidence in the market following the announcement that an emergency fund was in the offing after a five-week bear run.
A stockbroker said the market was expected to fall on Sunday any way because of profit-taking sell-offs after six days of gains.
‘But the way the prices fell on the day was unexpected. There were very few buyers for some of the issues, like the banks, during the closing minutes of trading,’ he said, adding the news of uncertainty of creation of Bangladesh Fund contributed to the massive fall.
ICB managing director Md Fayekuzzaman told reporters that the news was ‘fake’ and the rumours of uncertainty over the fund led to the fall of the market.
Salahuddin Ahmed Khan, a finance teacher at Dhaka University, said, ‘Sunday’s fall was not an uncommon event in any functional capital market. The news of the uncertainty about the mutual fund, however, deepened the plunge.’
He termed the fall a market correction as share prices had risen too rapidly over the past week.
‘The ineptitude of the Securities and Exchange Commission in surveillance should be a countable issue in this situation as it is mandated to do that,’ he maintained.
Market analyst Akter H Sannamat said, ‘The
slide of the index on Sunday would be positive for the market in the long run as the investors would shake themselves off the recent hype.
Release link:http://newagebd.com/newspaper1/business/11490.html
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