DSE loses 7pc in first half for political unrest

Stock prices declined 7.24 percent in the first six months of the year, mainly due to political turmoil in the first quarter, which eroded investor confidence.

DSEX, the benchmark index of Dhaka Stock Exchange, closed at 4,583 points on June 30, in contrast to 4,941 points on January 1.

Nationwide strikes and blockades for at least 70 days throughout the first quarter left a negative impact on the country's economic activities.

Most of the companies, including the listed ones, struggled to do business, while the financial sector also suffered from low credit growth.

On the backdrop of political uncertainty, sluggish credit growth and poor earnings declarations, the market went to the red in the first six months, said Brac EPL, a stockbrokerage firm, in an analysis. After witnessing correction from 2011 to 2013, the broader market index rebounded with a gain of 14 percent during 2014. However, the market could not hold the momentum in the first half of 2015.

Consequently, most of the sectors retraced in the year, headed by the financial sector, it added.

The entire financial sector declined steeply during the first half, with banks sliding 11.5 percent, non-bank financial institutions 15.8 percent, general insurance 22.4 percent and life insurance 23.2 percent.

Poor credit demand in the first six months, political unrest, piling up of non-performing loans and the governance of the overall financial sector led to further price correction of the sector, Brac EPL said. However, after the city corporation election in late April, political unrest subsided, which helped the market recover in the following months.

The interest rate cut by 2 percentage points on government savings certificates boosted investor confidence ahead of the national budget announcement.

The government also lowered the tax rate by 2.5 percentage points for all listed companies save for tobacco and telecommunication companies. Multinational companies outperformed the market with a 0.5 percent gain in the first half of 2015. Most of the companies posted healthy financial results with strong balance sheet.

They continued to pay better dividends, which were reflected in their high valuation, owing to the superior management and corporate governance.