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Market Woes Drive Investors Away as Dhaka Bourse Sees Significant Decline

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By June 20 this year, approximately 102,000 beneficiary owners’ (BO) accounts were emptied, and market capitalization plummeted by Tk 1.37 lakh crore due to prolonged poor returns, frustrating investors and prompting them to exit the market.

Data from the Central Depository Bangladesh Limited (CDBL) reveals that in the six months leading up to June 20, the total number of BO accounts with zero share balance surged by 34% to 398,000, while BO accounts with share balances fell by 91,651 to 1.312 million.

During this period, the benchmark index DSEX of the Dhaka Stock Exchange (DSE) dropped over 1,000 points, closing at 5,244, while the blue-chip index DS30 fell by 218 points, settling at 1,875. The market capitalization at DSE also declined by over 17%, ending at Tk 6.43 lakh crore on June 20.

Rising interest rates, taxes on individual investors’ capital gains from listed securities, and a severe confidence crisis due to regulatory interventions are collectively impacting stock market performance, according to stockbrokers and market experts.

The capital market has been grappling with economic uncertainty, exacerbated by the Russia-Ukraine war. In response to the crisis, the Bangladesh Securities and Exchange Commission (BSEC) imposed a floor price in 2022 to prevent a freefall in share prices. Despite lifting the restriction after more than two years, the bearish trend persisted. Consequently, BSEC reintroduced protective measures, including reducing the circuit breaker limit from 10% to 3%.

Abu Ahmed, former economics professor at the University of Dhaka, explained that unprecedentedly high interest rates, especially on treasury bonds, have driven large investors to shift their funds from the stock market to bonds. “With treasury bond rates steady at around 12%, it’s a risk-free, preferred choice for many investors,” he said. This shift has resulted in a fund crisis in the market, he added.

Ahmed also highlighted a decline in the number of reputable companies entering the market and underperformance in key sectors like banks, insurance, non-bank financial institutions, and manufacturing companies. He pointed out that a lack of good governance and long-term policy support has eroded investor confidence. Additionally, the government is withdrawing previously granted investment benefits.

Md Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA), stated in a June 11 press conference that factors such as the absence of high-quality initial public offerings (IPOs), governance issues among stakeholders, and the proposed capital gains tax are diminishing investor confidence. He urged the government to withdraw the capital gains tax, asserting that it exacerbates an already bleak market.

Finance Minister AH Mahmood Ali proposed a 15% tax on individual investors’ capital gains exceeding Tk 50 lakh from listed securities in the upcoming fiscal year budget, amid a market downturn. However, Abu Hena Md Rahmatul Muneem, chairman of the National Board of Revenue, argued in a post-budget press conference that taxation was not the root cause of the market’s issues, citing that long-standing tax incentives had not spurred market growth.

Despite these challenges, the benchmark index of the DSE has risen over the last four trading sessions, recovering 174 points to close at 5,244 last Thursday. Stockbrokers attribute this uptick to investor optimism about a potential rationalization of the capital gains tax proposal and a concessional salvage fund for the state-owned Investment Corporation of Bangladesh (ICB).

EBL Securities noted in their daily market commentary that rumors about the possible withdrawal of the proposed capital gains tax have instilled some confidence among cautious investors.

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Dhaka Bourse on Green Despite Sluggish Indices

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Dhaka Stock Market DSE, Bourse on the second working day of the week, 15th July, ended with a gaining performance in Indices and Turnover from the previous working session. This information is known from DSE sources.

662 crore 24 lakh taka shares were traded on this day. 39 crore 98 lakh more tradings were done in DSE today compared to the previous workday, July 12th, Shares worth Tk 622 crores 25 lakh shares were traded last time, Sunday.

The benchmark DSEX increased 2.17 points or 5,484 The Shariah-based index DSES added 0.72 points or 1,203 and the blue-chip index DS30 gained by 7.17 points or 1,937.

Of the issues traded, 140 advanced, 191 declined and 66 remained unchanged.

Information Services Netowrk Limited ranked top gainer on DSE, the share price increased by Tk 4.50 paisa or 9.93 percent. On this day, the share was last traded at Tk 49.80 paisa.

Linde Bangladsh Limited ranked top loser on the DSE, the share price dropped by Tk 33.40 paisa or 3.00 percent. On this day, the share was last traded at Tk 1,080.10 paisa.

DSE topped on trade is Orion Infusion Limited 57 crore 23 lakh takas of company shares have been traded.

A total of 40 companies’ shares were traded in the Block on Dhaka Stock Exchange. A total of 1 crore 53 lakh 88 thousand 588 shares of the companies were traded. The financial value of which is 51 crore 12 lakh taka

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Stocks mixed, dollar rises as traders weigh Trump shooting

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Asian markets were mixed Monday as investors weigh the impact of the assassination attempt on Donald Trump with data suggesting it has boosted his chances of being re-elected president.

Eyes are also on a key meeting of China’s top leadership in Beijing, with hopes for measures to boost the world’s number two economy, which grew less than expected in the second quarter.

Investors struggled to extend the rally enjoyed on Wall Street, where all three main indexes ended on a positive note despite a forecast-topping read on US wholesale prices.

The figures were not enough to overshadow Thursday’s news that the consumer price index had slowed more than expected in June, which ramped up bets on a Federal Reserve interest rate cut in September.

That came after central bank chief Jerome Powell told lawmakers that inflation did not need to come in at decision-makers’ two percent target for them to begin lowering borrowing costs.

However, investors are keeping a close eye on developments in the United States after Trump was hit with a bullet on Saturday at a rally ahead of the Republican convention this week.

While the odds of him beating President Joe Biden had been rising in recent weeks, they got an extra lift from the shooting.

Observers said a Trump victory could see lower corporate taxes — a boost for companies’ bottom lines — but also an increase in tensions with China with fresh tariffs possible.

Still, Katrina Ell at Moody’s Analytics said: “The assassination attempt might lead to a temporary boost in the polls for Trump, but a lot can change before November.

“Financial markets are expected to soon refocus on the Federal Reserve and the growing likelihood of a rate cut in September.”

The dollar rose Monday, having softened last week owing to the prospect of lower rates, while equity markets were mixed.

Hong Kong, Shanghai, Seoul, Taipei and Jakarta dropped, while Sydney, Singapore, Manila and Wellington rose.

Official data showed the Chinese economy expanded just 4.7 percent in the second quarter, well below the 5.1 percent forecast in a survey by Bloomberg.

Separate data showed retail sales slowed sharply in June as the country’s army of consumers remain cautious.

The readings highlight the tough work leaders face as they grapple with a real estate debt crisis, weakening consumption, an ageing population and trade tensions with Western rivals.

President Xi Jinping and other top leaders are gathered in Beijing to hammer out plans to kickstart growth, though analysts warned there was unlikely to be any major announcement for the short-term.

“A Trump victory would be damaging for China’s economy given manufacturing and exports are powering the recovery,” Moody’s Ell added.

“Trump has indicated a number of significant trade barriers would be imposed on China under his leadership.”

– Key figures around 0230 GMT –

Hong Kong – Hang Seng Index: DOWN 0.9 percent at 18,123.67

Shanghai – Composite: DOWN 0.2 percent at 2,965.55

Tokyo – Nikkei 225: Closed for a holiday

Dollar/yen: UP at 158.04 yen from 157.88 yen on Friday

Euro/dollar: DOWN at $1.0889 from $1.0906

Pound/dollar: DOWN at $1.2966 from $1.2989

Euro/pound: DOWN at 83.95 pence from 83.97 pence

West Texas Intermediate: DOWN 0.5 percent at $81.80 per barrel

Brent North Sea Crude: DOWN 0.5 percent at $84.64 per barrel

New York – Dow: UP 0.6 percent at 40,000.90 (close)

London – FTSE 100: UP 0.4 percent at 8,252.91 (close)

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SK Trims’ Bank Accounts Frozen Amid Corruption Probe

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The Bangladesh Financial Intelligence Unit (BFIU) has frozen the bank accounts of SK Trims and Industries, a publicly traded company allegedly owned by the family of former National Board of Revenue (NBR) official Matiur Rahman. This action follows court orders and a recommendation from the Anti-Corruption Commission (ACC), as disclosed today on the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) websites.

Key Figures and Investigation
Media reports indicate that MA Kaium Howlader and Md Nurul Huda, brothers of Matiur Rahman, hold significant positions in SK Trims, serving as Managing Director and Sponsor Director, respectively. The ACC is currently probing Matiur Rahman’s assets on allegations of amassing illegal wealth.

On July 11, a Dhaka court mandated the freezing of 116 bank accounts and 23 beneficiary owner (BO) accounts, along with the seizure of multiple properties belonging to Matiur Rahman and his family.

Company Disclosure and Response
In a recent disclosure, SK Trims confirmed that the Metropolitan Sessions Judge Court and the BFIU had frozen all their bank accounts based on the ACC’s recommendation. Efforts to reach Md Riaz Haider, the company secretary, and Md Nazmul Hossain, the Chief Financial Officer (CFO), for comments were unsuccessful.

According to SK Trims’ annual report for 2022-23, the company maintains over a dozen bank accounts across various banks, including fixed deposit receipts (FDRs), loans, and other accounts critical for its business operations.

Stock Market Performance and Financial Impact
SK Trims was listed on the stock exchange in 2018, raising Tk30 crore through an initial public offering (IPO) to expand its business. The company’s share price has fluctuated significantly following allegations against Matiur Rahman. From Tk27.6 per share on June 20, it fell to Tk24.4 on July 2, then briefly rose to Tk27 on July 9, before declining again, closing at Tk24.8 on the DSE yesterday.

Business Operations and Investments
SK Trims specializes in manufacturing various products for the export-oriented garment industry, including sewing thread, elastic, poly, cartons, photo cards, backboards, barcodes, hang tags, tissue paper, and gum tape.

The company has invested Tk17 crore in seven companies as of June 30, 2023. Among these, Dominage Steel Building Systems, Mamun Agro Products, Acme Pesticides, and Asiatic Laboratories are listed on the bourses, while Anik Trims, B Brothers, and Banbiz (Pvt) remain non-listed. It is unclear whether SK Trims has sold or still holds shares from these investments.

Revenue and Profit Growth
SK Trims reported a 40% increase in revenue to Tk92 crore for the first nine months of the 2023-24 fiscal year, with net profit soaring by 86% to Tk8.81 crore. These figures surpassed the company’s annual revenue and profit of Tk88.75 crore and Tk7.97 crore, respectively, for the 2022-23 fiscal year. The company paid a 3% cash dividend to its shareholders in FY23 and its shares are currently trading in the B category.

As of June 30, sponsor-directors held 31.23%, institutional investors 28.86%, and the general public 39.91% of the company’s shares.

Industry Concerns
Ziaur Rahman, General Secretary of the Benapole Landport Importers and Exporters Association, expressed concerns over the significant losses traders face with perishable food products due to halted trade services. “Since the goods trucks cannot enter after the evening, the trade deficit will increase,” he noted.

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