Stock market experiences another setback due to bank sector's rally causing profit-selling actions
The Dhaka Stock Exchange (DSE) witnessed a decline for the second day in a row on 6 August 2022, with the DSEX index falling 14 points to close at 5,471. This was primarily due to growing concerns about irregularities and deteriorating financial health within banks.
The banking sector, in particular, experienced a slip, with significant losses and governance issues undermining investor confidence. National Bank, for example, has been facing continuous heavy losses, negative net asset values, and repeated board dissolutions by Bangladesh Bank, which reflect deeper structural problems in the banking sector, leading to diminished trust and sell-offs in related stocks.
Broader market liquidity issues, low investor participation, and cautious sentiment reflected in the steady decline of trading volumes on DSE since 2023, compounded by reduced foreign exchange reserves and a global economic slowdown affecting export demand, likely contributed to the decline. These macroeconomic vulnerabilities would have exacerbated sector-specific problems, causing sharper declines in bank stocks.
The banking sector was particularly sensitive due to ongoing governance challenges and financial instability evident since at least 2022. This background, combined with immediate losses in banks like National Bank and liquidity tightening, explains the slip in bank stocks around early August 2022.
In addition to National Bank, other top contributors to the day's decline included Islami Bank, BRAC Bank, City Bank, Eastern Bank, Southeast Bank, and Bank Asia. The banking sector posted the highest loss of 1.73%. Of the 400 issues traded, 154 advanced, 184 declined, and 62 remained unchanged.
Profit-taking dominated investor sentiment, with investors preferring to realize short-term gains from the recent rallies. The port city bourse, Chittagong Stock Exchange, also witnessed a profit-taking session today, with the Selective Categories' Index (CSCX) and All Share Price Index (CASPI) decreasing by 31 and 49 points, respectively.
Analysts noted a pause after a sharp rally in large-cap stocks, particularly in the banking sector. The bullish momentum of the benchmark index took a breather for the second consecutive session. However, the ongoing concerns about the banking sector and broader market vulnerabilities may continue to impact the market in the coming days.
References:
- The Daily Star
- Financial Express
- Bangladesh Bank
- The Financial Express
Business and finance underwent a difficult period, with the banking sector experiencing significant losses due to governance issues and financial instability. In particular, concerns about irregularities and deteriorating financial health within banks led to a decline in investor confidence, causing a slip in bank stocks, such as National Bank, and affecting the overall business environment. Analysts predict that ongoing concerns about the banking sector and broader market vulnerabilities may continue to impact the market in the near future.
