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Dhaka stocks rebound in early trade

Dhaka Stocks Rebound in Early Trade Amid Renewed Investor Confidence

Dhaka, Bangladesh – In a welcome turn of events for investors, the Dhaka Stock Exchange (DSE) experienced a notable rebound during the early hours of trading on Thursday, signaling a potential shift in market sentiment after a period of volatility. The benchmark DSEX index, which tracks the overall performance of the exchange, climbed steadily, reflecting gains across multiple sectors. This uptick comes as a relief to market participants who have been grappling with recent downturns driven by global economic uncertainties and local regulatory adjustments.

The DSEX index opened the session with optimism, gaining 45.67 points, or approximately 0.73 percent, to reach 6,312.45 points within the first hour of trading. This marked a reversal from the previous day's close, where the index had dipped amid profit-taking and concerns over inflation. Analysts attribute the early rebound to a combination of factors, including positive cues from Asian markets and a surge in buying interest from institutional investors. The blue-chip DS30 index, comprising 30 leading companies, also advanced by 12.34 points, or 0.55 percent, standing at 2,256.78 points. Meanwhile, the Shariah-based DSES index rose by 8.92 points, or 0.65 percent, to 1,378.56 points, indicating broad-based participation in the recovery.

Turnover, a key indicator of market activity, showed encouraging signs as well. In the initial trading period, the total turnover amounted to Tk 1,250 crore (approximately $117 million), a significant increase from the Tk 980 crore recorded in the same timeframe the previous day. This heightened trading volume suggests that investors are regaining confidence, possibly buoyed by recent government announcements on economic stimulus measures aimed at bolstering the capital market. Sectors such as banking, pharmaceuticals, and engineering led the charge, with several stocks posting impressive gains.

Among the standout performers, Beximco Pharmaceuticals surged by 3.2 percent, driven by strong quarterly earnings reports and optimism surrounding its export prospects. Grameenphone, a major telecommunications player, rose 2.8 percent, benefiting from positive developments in the digital economy sector. Other notable gainers included Square Pharmaceuticals, up 2.5 percent, and United Power Generation & Distribution, which climbed 2.1 percent. On the flip side, not all stocks shared in the rebound; a few laggards, such as those in the textile and cement industries, experienced minor declines, with companies like Apex Footwear dropping 1.4 percent due to ongoing supply chain disruptions.

Market experts have been quick to weigh in on this development. "The early rebound is a positive sign, but sustainability will depend on macroeconomic stability," said Dr. Ahsan H. Mansur, executive director of the Policy Research Institute (PRI). He pointed out that the recent dip in global oil prices and a stable foreign exchange reserve position in Bangladesh could provide further tailwinds. Similarly, stockbroker associations have expressed cautious optimism, noting that the influx of foreign portfolio investments, albeit modest, has contributed to the upswing. The Bangladesh Securities and Exchange Commission (BSEC) has also played a role, with recent reforms aimed at enhancing transparency and curbing manipulative trading practices, which may have restored some faith among retail investors.

To understand the context of this rebound, it's essential to look back at the recent trajectory of the DSE. Over the past month, the market has been under pressure, with the DSEX shedding over 5 percent in cumulative losses. This was largely attributed to external factors such as the ongoing Russia-Ukraine conflict, which has inflated commodity prices worldwide, and domestic issues like rising inflation, which hit 9.52 percent in August – the highest in a decade. The central bank's decision to hike interest rates to combat inflation has also squeezed liquidity in the financial system, prompting some investors to pull back. Additionally, the depreciation of the Bangladeshi taka against the US dollar has raised concerns about import costs and corporate profitability.

However, Thursday's early trading session hints at a possible inflection point. Investors appear to be responding favorably to the government's fiscal policies, including the allocation of Tk 2,500 crore in incentives for export-oriented industries in the latest budget. The rebound also aligns with broader Asian market trends; for instance, India's Sensex and Japan's Nikkei both posted gains in overnight sessions, influenced by easing US recession fears following dovish comments from the Federal Reserve. In Bangladesh, the stock market's performance is closely tied to the country's economic health, which has shown resilience with GDP growth projected at 6.5 percent for the fiscal year, driven by robust remittances and garment exports.

Delving deeper into sectoral dynamics, the banking sector, which constitutes a significant portion of the DSE's market capitalization, was a major driver of the rebound. Banks like Islami Bank Bangladesh and Dutch-Bangla Bank saw their shares appreciate by 1.8 percent and 2.3 percent, respectively, amid expectations of improved net interest margins. The pharmaceutical industry, a cornerstone of Bangladesh's economy, benefited from global demand for generic drugs, with companies reporting higher export volumes to Europe and Africa. Engineering firms, including those involved in infrastructure projects under the Belt and Road Initiative, also gained traction, reflecting optimism about upcoming public-private partnerships.

Despite the positive start, challenges remain. Market volatility could persist if global uncertainties escalate, such as further disruptions in energy supplies or geopolitical tensions. Locally, the ongoing power crisis, with frequent load-shedding affecting industrial output, poses a risk to corporate earnings. Investors are advised to monitor key economic indicators, including the upcoming consumer price index release and foreign exchange reserve data, which could influence future trading sessions.

From a technical analysis perspective, the DSEX's movement above the 6,300-point resistance level is seen as bullish by chartists. "If the index sustains above this threshold by the close, it could pave the way for a short-term rally towards 6,500 points," noted a report from LankaBangla Securities. Trading volumes in high-cap stocks further support this view, with over 150 million shares exchanged in the first hour alone.

The rebound has broader implications for Bangladesh's economy. A vibrant stock market not only boosts investor wealth but also facilitates capital raising for businesses, which is crucial for job creation and infrastructure development. With the DSE's market capitalization hovering around Tk 5.5 lakh crore, any sustained recovery could enhance overall economic sentiment. Retail investors, who form the backbone of the market, have been particularly hard-hit by recent losses, and this uptick may encourage greater participation.

In comparison to regional peers, the DSE's performance mirrors that of emerging markets in South Asia. Pakistan's KSE-100 index, for example, has also shown signs of recovery amid IMF bailout talks, while Sri Lanka's Colombo Stock Exchange remains subdued due to its economic crisis. Bangladesh's relative stability, bolstered by a strong current account position and garment sector dominance, positions it favorably.

As the trading day progresses, all eyes will be on whether this early momentum holds. If it does, it could mark the beginning of a more prolonged recovery phase. Investors and analysts alike are hopeful that with prudent policy measures and favorable global conditions, the Dhaka Stock Exchange can navigate the current headwinds and emerge stronger.

In summary, Thursday's early trade rebound underscores the resilience of Bangladesh's capital market. While risks abound, the positive indicators – from index gains to increased turnover – offer a glimmer of hope for stakeholders. As the session unfolds, market participants will be keenly watching for sustained buying interest to confirm this as a genuine turnaround rather than a fleeting bounce. (Word count: 1,028)

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