Reserve crosses $42B mark, stock market back on track
After a series of troubling news regarding the economy throughout the last week, there is some relief in the two main sectors of the economy.
After a sharp fall for eight consecutive days, the index of both Stock Exchange returned to increase and at the same time, foreign-exchange reserves passed the $42 billion mark.
Although there is no good news regarding commodity prices.
Last week, when the country’s two major bourses started to fall simultaneously, the foreign exchange reserves also decreased to an 18 month consecutive low.
On top of that, the inflation rate has also increased to its highest level in the last 18 months.
“Recently, the forex reserves took a slight dip below the $42-billion mark, but crossed the $42 billion mark right after to $42.30 billion,” said the General Manager of the Forex Reserve and Treasury Management Department Saiful Islam, while talking to the media.
Higher dollar expenditure for imports and other necessities is putting pressure on the foreign exchange reserves and according to the latest report of Bangladesh Bank, after about six working days, a little amount was added to the foreign exchange reserves which then increased to $42.3 billion.
To resolve the decrease, the government has taken several measures — like putting a bar on civil servants’ foreign visits and pausing development projects that require a large number of imported materials.
Saiful Islam welcomed the government’s measures and informed us that the benefit of these measures will come in long term.
Bangladesh had a record $48.02 billion forex reserve in August last year.
Similarly, the regulatory body Bangladesh Securities and Exchange Commission’s (BSEC) latest instructions regarding the margin loan limit and Finance Minister’s various directives to restore normalcy to the stock market have paid off.
Finance Minister AHM Mustafa Kamal at a meeting with Bangladesh Bank (BB) Governor Fazle Kabir and other senior officials of the Ministry asked them to work on boosting stock market investment.
“The economy of Bangladesh stands on a strong base and the growth position is very positive, but an unstable situation of the stock market is not acceptable. Despite the Russia-Ukraine war and the Covid-19 pandemic, the economic growth of Bangladesh will continue,” he said.
Kamal on Sunday gave several directives to the Bangladesh Bank and Bangladesh Security and Exchange Commission (BSEC) for immediate implementation to boost the stock market.
In order to attract capital in the market, state-owned investment institution ICB has been instructed to keep the bank’s investment outside the investment limit or exposure limit of this institution in the capital market.
It has also been decided to double the size of the Tk1.5 billion funds given to the ICB for small investors, which had expired.
The finance minister asked for an increased tenure of the funds along with doubling the funds’ size. The investments will be made from this fund from Monday, the Finance Ministry sources said.
After those decisions, the Dhaka Stock Exchange (DSE)– Bangladesh’s leading stock market, rose 1.93% on Monday, the second trading day of the week.
On the other hand, the Chittagong Stock Exchange (CSE) gained 1.78%.
Market insiders informed that the stock market downturn began in the second week of May as instability in the global market and the rising value of the dollar spooked investors.
A sell-off caused indices to fall for eight straight days and in those eight days, the DSE fell 555.4 points or 8.29%.
On Sunday, the BSEC increased the margin loan limit in an effort to increase liquidity in the market and counteract the recent dip in the stock market.
The loan limit was raised from 80% to 100%, meaning that investors are now able to get 100% of their investment as a loan.
At the DSE, 343 stocks advanced, 19 declined and 14 remained the same.
However, the turnover of the premier bourse dropped 3% to Tk658 crore.
Paramount Textiles topped the gainers’ list which rose 9.94%. S Alam Cold Rolled Steels, Midas Finance, National Feed Mills, and VFS Thread were on the list.
Bangas Ltd’s shares dropped the most by 4.78%, whereas, RD Food, Dhaka Insurance, International Leasing Financial Services, and Bangladesh National Insurance were among the other companies on the loser tally.
Beximco Ltd became the most traded stock with shares worth Tk48 crore changing hands followed by Shinepukur Ceramics, JMI Hospital, Bangladesh Shipping Corporation, and IPDC Finance.
The Chittagong Stock Exchange (CSE) also rose today. The CASPI, the all-share price index of the port city bourse, edged up 322 points, or 1.78%, to 18,400.
Among the 274 stocks traded, 207 advanced, 51 fell and 16 remained the same.
Regarding the share market volatility, a commissioner of the BSEC preferring to remain anonymous told Dhaka Tribune: “The market was falling because investors were panicking. But finally, it is back on track.”
“But the market can’t decline continuously in such a fashion for economic reasons. Our economy is not in that bad shape and whatever economic pressures we are in now, they have not been created overnight.”
“I think the government’s recent decision helped the market. but the fall in the stock market in the last few days is unusual. It should be investigated whether any particular circle is causing this bidding in a planned manner,” the commissioner added.