Poor dividends pull stocks down
Poor dividends announced by the listed companies and forced sale of shares by merchant bankers are pushing stocks down, adding further woes to the investors whose confidence in the market has already been dented, investors and analysts said.
The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), declined for the third straight day yesterday, giving up 28.48 points, or 0.60 percent, to finish at 4,670.40.
The broader index shed 101.26 points in the last three trading sessions and it came after 100 listed companies declared dividend in the last three days for the year that ended on June 30, 2019.
Of them, only nine companies announced dividends that were higher than the last fiscal year’s, while 52 companies declared lower dividends. Twenty-two companies declared no dividend.
Of the companies that announced no dividend, three plummeted by more than 20 percent yesterday: Intech Online fell by 36 percent, Usmania Glass declined 28 percent, and Tosrifa Industries gave up 20.58 percent.
The circuit breaker, which automatically stops a stock to rise or fall by more than 10 percent in a single day, is not applied on the first trading day after a dividend is announced.
The stocks of seven other companies tumbled by more than 10 percent. “As the dividend of the companies decreased, investors were frustrated and they sold off shares,” said a top official of an asset management company.
He said the market has been suffering from a lack of confidence for several months. The lacklustre dividend declaration only mounted the crisis.
Another reason for the market fall is forced sale, the asset manager said, adding that a number of stocks faced the forced liquidation because of a huge price fall.
If the prices of securities bought with margin loans decrease past a certain point, the lenders can legally compel the investors to sell some of their assets to save their fund.
Abu Ahmed, a market analyst, said many companies are giving lower dividend this year. Even companies that are giving the dividends are mainly providing it in the form of stock dividend, instead of cash dividend.
“So, what did the investors get for investing into these stocks? The investors are upset because of the lower dividend payout. Such frustration impacts the market which is normal.”
A merchant banker said stock investors are losing money because of rampant manipulation and the lower-than-expected dividend.“So, the market fall is not unexpected,” he said.
He said the weakening health of the banking sector owing to rising non-performing loans, a lack of corporate governance and increasing capital shortfall also dented the confidence of the investors.
The total amount of default loans in the banking sector stood at Tk 112,425 crore at the end of June, up 20 percent from six months earlier. The DSE lost Tk 18,612 crore from its market capitalisation in the last one month.
Yesterday, turnover, another important indicator of the market, rose 17.1 percent to Tk 358.18 crore.
Of the traded issues, 110 advanced and 197 declined while 47 securities closed unchanged on the premier bourse.
National Tubes dominated the turnover chart with its transaction of Tk 18.98 crore, followed by Sonar Bangla Insurance, Monno Ceramics, Legacy Footwear, and Square Pharmaceuticals. Alif Manufacturing Company was the day’s best performer with 21.31 percent gain, while Intech Online was the worst loser, shedding 37.03 percent.
Chattogram stocks were also down with the bourse’s benchmark index, CSCX, decreasing 83.19 points, or 0.95 percent, to finish the day at 8,627.11.
Losers beat gainers as 145 securities declined and 67 advanced while 27 finished unchanged on the Chittagong Stock Exchange. The port city bourse traded shares and mutual fund units worth Tk 14.84 crore.
