DSE extends rally as speculative trading lifts NBFI stocks

Loss-making NBFIs soar on speculation amid liquidation fears.
A striking contradiction played out on the Dhaka Stock Exchange last week. Even as Bangladesh Bank prepared to wind up nine non-bank financial institutions (NBFIs) deemed non-viable, shares of several of those very firms surged spectacularly, fuelled not by recovery hopes but by a wave of speculative trading chasing quick gains.

Stocks of Fareast Finance, Premier Leasing, International Leasing, FAS Finance, Peoples Leasing, Prime Finance and Bangladesh Industrial Finance Company (BIFC) jumped more than 50% to over 60% within a week.

Market analysts said the sharp rise had little to do with fundamentals and was instead fuelled by short-term traders exploiting volatility triggered by recent regulatory announcements.

The rally followed Bangladesh Bank Governor Ahsan H Mansur’s statement that nine NBFIs would be declared non-viable and placed under liquidation after independent audits.

He made the remarks at a press briefing at the central bank headquarters on 5 January, saying independent auditors would be appointed to determine the actual financial condition of the troubled institutions.

The nine NBFIs set for liquidation are FAS Finance, BIFC, Premier Leasing, Fareast Finance, GSP Finance, Prime Finance, Aviva Finance, Peoples Leasing and International Leasing.

Immediately after the announcement, several of the stocks witnessed panic selling, as investors feared a complete wipeout of shareholder value. That sentiment soon reversed, however, with aggressive speculative buying pushing prices to upper circuit limits on multiple trading sessions.

In an interview with The Business Standard, Governor Mansur said the government had agreed to provide funds to safeguard individual depositors under the newly enacted Bank Resolution Ordinance 2025.

He said individual depositors would get back their principal, though interest would not be paid, while institutional depositors would depend on recoveries from the liquidation process.

Bangladesh Bank will appoint liquidators to assess assets and liabilities, recover defaulted loans and sell properties and investments before distributing proceeds among creditors as per law.

Market rides broader optimism

The speculative surge in weak NBFI stocks came amid a broader rally on the Dhaka Stock Exchange.

The benchmark DSEX advanced 140 points, or 2.84%, to 5,099 last week, while the DS30 index rose 50 points, or 2.62%, to close at 1,962.

Market breadth remained strong, with 309 stocks gaining against 41 losers. Average daily turnover jumped 51% week-on-week to Tk575 crore, and total market capitalisation rose by Tk6,300 crore.

EBL Securities, in its weekly market review, said the market regained recovery momentum on the back of broad-based participation and renewed buying interest in undervalued blue-chip stocks.

The market started the week on a strong note and sustained positive momentum for three consecutive sessions. Although some profit booking was seen toward the end of the week, it did not materially weaken the bullish sentiment.

Insurance stocks saw notable accumulation following recent sector developments, while pharmaceuticals and banking also drew strong investor interest. Most sectors ended the week in positive territory.

Source: The Business Standard