Stocks in Bangladesh dropped for a fifth consecutive day yesterday for a selling spree of some large investors, sending the major index of the Dhaka Stock Exchange (DSE) to a three-year low.

High interest rate in the banking sector, devaluation of the local currency, and reinstatement of a capital gain tax for individual investors was the main reason behind the selling spree, according to market analysts.

The DSEX, the benchmark index of the DSE, plunged by 86 points, or 1.56 percent, from that on Thursday to hit 5,431 points.

The DSES Index, which is comprised of shariah-based companies, was down by 20 points, or 1.69 percent, at 1,191 points.

The blue-chip index, DS30, slipped by 1.29 percent to 1,948 points.

A top official of a leading stock brokerage, preferring anonymity, said large investors, especially foreign investors, were not optimistic with the macroeconomic outlook of the country and so are selling shares.

Although most of the blue-chip stocks are already cheap, the investors are selling those of significant amounts, he said.

"I think they fear that Bangladesh may face a serious crisis of foreign exchange reserves, which spurred them to sell off shares even at a loss," he said.

The country is still sitting on a foreign exchange reserve of $18.4 billion but it did little to convince them to keep their investments within the country, he added.

Power Grid Company dragged down the DSEX by the biggest margin of 12 points, apparently for news going round that the government had decided to issue shares against share money deposit.

Share money deposit is money the government paid in exchange for shares that had not been acquired up until recently.

The company recently decided to issue 250 crore preference shares to the Ministry of Power, Energy and Mineral Resources.

Investors feared that the issuance of shares may reduce the earnings per share of the company, and thus its dividends. So, many investors sold off the stocks.

However, the Bangladesh Securities and Exchange Commission in a press release said these preference shares would not be a part of its ordinary shares and would not increase the paid-up capital.

Companies pay dividends to shareholders of preference shares before common stock dividends are issued.

British American Tobacco Bangladesh brought down the index by the second biggest margin of 7 points, followed by Beximco Pharmaceuticals and Renata by 5 points each.

These companies' shares dropped mainly due to sales pressure from foreign investors, said a top official of another brokerage firm.

Local institutional investors were buying the shares, but they are also cautious as these stocks may fall further. So, the stock indices were eroded massively, he added.

Turnover, which indicates the amount of trading activity, of the DSE came down to a one-month low of Tk 409 crore, which was 39 percent lower than that of the previous day's Tk 676 crore.

Out of the 388 issues that were traded, 347 saw price falls, 22 managed to end higher while 19 remained unchanged.

Beach Hatchery became the most traded share with Tk 19 crore worth being transacted, followed by eGeneration, ICB AMCL Sonali Bank 1st Mutual Fund, Orion Infusion and Orion Pharma.

Chittagong Stock Exchange also plunged yesterday with its all-share price index (CASPI) shedding 269 points, or 1.68 percent, to 15,737 points.

The port city bourse's turnover amounted to Tk 8 crore.