Stock markets take a hit
Country’s stock market plunged on Monday as investors reacted negatively to the government’s Tk 20-a-litre fuel price hike, fearing that higher transportation and production costs would intensify inflation and squeeze corporate earnings.
The sharp sell-off snapped a four-session winning streak during which the benchmark index had gained 213 points.
The Dhaka Stock Exchange (DSE) benchmark DSEX index fell 42 points, or 0.74 per cent, to close at 5,550. The blue-chip DS30 index dropped 15 points to 2,106, while the DSES index, representing Shariah-compliant stocks, declined 12 points to 1,107.
Market breadth was strongly negative, with 254 issues declining against just 100 advancing, while 32 remained unchanged.
Turnover, however, remained relatively strong at Tk 789 crore, up 5.6 per cent from Tk 747 crore in the previous session.
Eastern Bank was the most-traded stock, with shares worth Tk 27.2 crore changing hands. Sharp Industries, Envoy Textiles, IPDC Finance and Orion Infusion were among the other actively traded stocks.
The Chittagong Stock Exchange (CSE) also ended lower. Its All Share Price Index (CASPI) fell 34 points to 14,822, while the CSE Selective Categories Index (CSCX) shed 20 points to 9,088.
Market insiders attributed Monday’s sell-off primarily to the government’s decision to raise the prices of all four major petroleum products by Tk 20 a litre.
The revised prices took effect on Monday, with diesel increasing from Tk 115 to Tk 135 a litre, octane from Tk 145 to Tk 165, petrol from Tk 140 to Tk 160 and kerosene from Tk 135 to Tk 155.
The increases represent rises of 17.4 per cent for diesel, 13.8 per cent for octane, 14.3 per cent for petrol and 14.8 per cent for kerosene.
Investors fear the steep increase will have a wider impact on the economy because fuel is a key input for transportation, manufacturing, logistics and distribution.
Higher fuel costs are expected to raise companies’ operating expenses and potentially squeeze profit margins, particularly for businesses that depend heavily on transportation and generators.
Market participants also expressed concern that companies may face difficulty passing the entire increase in costs on to consumers at a time when household purchasing power is already under pressure.
The resulting increase in the prices of goods and services could further fuel inflation, while weaker consumer spending could affect corporate revenues.
Fearing pressure on both household finances and company profitability, investors opted to sell shares rather than make fresh investments, according to market insiders.
Some value-seeking investors attempted to buy stocks that had fallen to lower valuations, but the buying pressure was insufficient to prevent the broader market decline.
The market was also facing concerns over developments in global monetary policy.
Investors were weighing the US Federal Reserve’s decision to raise its benchmark interest rate by 25 basis points, the first such increase in more than three years, as well as its indication that further tightening could follow.
The combination of higher domestic fuel prices and tighter global financial conditions added to investor concerns over inflation, financing costs and the outlook for businesses.
For the domestic market, the immediate focus remained on how quickly higher fuel costs feed through into transportation, production and consumer prices.
The latest market reaction reflects investor concerns that the fuel price increase could have effects well beyond the energy sector, with implications for operating costs, consumer demand and corporate earnings across the economy.
