Blue chips sink, junk stocks go wild
The majority of the high-quality stocks in the Dhaka Stock Exchange sank recently as their usual holders have largely become inactive because of concerns over political uncertainty centring the next national election.
The blue chip shares are mostly held by foreign investors and institutional investors, according to analysts.
On Thursday, only six of the high-quality stocks, also known as blue chips, were found to have closed higher than a year ago; the remaining 24 declined, according to data from the Dhaka Stock Exchange.
Blue chip stocks are mostly stocks from well-managed companies with a large amount of paid-up capital and a long record of paying profits to shareholders during good and bad economic conditions.
In the last one year, 13 stocks plummeted at least 20 percent. Of them, LankaBangla sank the most: by 58.73 percent to Tk 26.
ACI fell 42.03 percent to Tk 364, National Bank 35.71 percent to Tk 9.10, and Brac Bank 33.36 percent to Tk 69.
City Bank shed 33.33 percent to Tk 32 and Eastern Bank 31.25 percent to Tk 33, DSE data showed.
As a result, the DS 30 index, which comprises high-quality stocks, fell 12.20 percent to 1,925.76 points in the last one year.
The decline comes at a time when junk stocks have been spuriously soaring.
Abdul Mannan, an investor, said market analysts and the regulator always advice them to invest in blue chip stocks.
“But these stocks have hammered investors' portfolio in recent times. Why should an investor put in money in the blue chip stocks?”
On the other hand, junk stocks have seen a bull run during the same period, he added.
Take the case of Dulamia Cotton, one of the junk stocks, as an example. The stock soared 140 percent in the last one year to Thursday.
Besides, Bangas soared 128.33 percent, Khulna Printing & Packaging 109.09 percent, Jute Spinners 49.35 percent, Meghna Milk 43.75 percent, Savar Refractories 42.5 percent, Eastern Cables 40.84 percent, Meghna Pet Industries 36.36 percent, and Kay & Que 31.82 percent.
“This is not a good sign for the market,” said Mohammed Rahmat Pasha, managing director of UCB Capital Management.
Some big local investors and foreign investors are observing the political situation, so their investment is becoming less and less as the national election nears, he added.
Since October last year, net foreign investment in the capital market has been Tk 225.45 crore in the negative, DSE data showed.
“Our institutional investors are rushing for speculative items and foreign investors were not active in the last few months,” said Abu Ahmed, a stock market analyst.
If the trend continues, it will be a matter of concern for the development of the capital market.
“The mismatch is clear in the market,” said Ahmed, also a former chairman of the economics department of Dhaka University.
Source: https://www.thedailystar.net
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