As the Finance Minister, A H M Mustafa Kamal, prepares to present his budget for the fiscal year 2019-2020 on Thursday (13th June, 2019), both private and institutional investors continued their spending spree in the Dhaka Stock Exchange (DSE) and the Chattogram Stock Exchange (CSE), sending indexes of both the exchanges surging upwards as market confidence remains high on the backdrop of a positive budgetary outlook.
At the end of trading on Tuesday evening, DSEX, the main index of the DSE, closed at 5,475 points, showing a gain of 44.38 points over the previous session. This has been the trend since the start of the week, as the markets resumed after the Eid holidays, and investors have continued to push stocks upwards.
The Finance Minister earlier mentioned that there would be several incentives to the market in the upcoming budget, in order to stimulate the stock markets. In light of the expected fiscal incentives and with the legal method for investing untaxed income in the stock market expected to be continued, investors continue to pour their funds into the market, with positive future expectations driving up turnover as well as prices.
In addition to the DSEX gaining momentum, another important indicator of the market, the Turnover, rose to its highest mark over the past 3 months ending more than 19 percent up from the previous sessions turnover.
However, the stock markets had been going through a difficult time over the last three months, with Bangladesh bank making a frantic move in the market in May with an injection of Tk. 856 crore in the state run Investment Corporation of Bangladesh (ICB), under the market refinancing scheme. The government has been active in trying to shore up the stock market recently, as it had asked the central bank to intervene with financing.
Overseas investors had also been withdrawing funding in the stock market over the past 3 months, as the market had seen a downtrend during this time, with overseas investors withdrawing funds worth Tk 343 crore in the last three months.
Although the net foreign investment in the stock market had been positive in February and January, following the elections, the net foreign investment dipped to Tk 65.16 crore negative in May in addition to a Tk 154 crore negative in April. However, the dip in the net foreign investment could be attributed to certain overseas investors taking out their profits from the markets after largescale investments in the first 2 months of the year.
Recently, the Prime Minister had said to parliament recently that the government had taken different steps in order to keep the stock market stable. In addition to this, the Finance minister had also mentioned that his upcoming budget shall provide policy support to businesses in the upcoming budget in addition to hinting that corporate tax should not be increased.
With the positive inputs from the policy makers in the government, including the recapitalization from the central bank, the stock markets have been showing upward movements recently.
Many experts blamed the lack of liquidity in the banking sector for the fall in the capital markets, whilst others blamed profiteering from certain sections in the market.
With the budget expected to be positive towards the stock markets and its investors, both private and institutional, it is expected that the markets shall be following an upward trend through this month and into the next fiscal year.