Written by The Banking Post
A prolonged exit of investors from the secondary market and persistently thin liquidity are reshaping the benchmark index of the Dhaka Stock Exchange, pushing out fundamentally strong stocks while pulling in weak, speculative names.
The latest rebalancing of the DSEX, announced on Tuesday, reflects the reality of a market starved of fresh investment. “This is a true reflection of our market. With no investors capable of making new investments, this outcome was inevitable,” said Md Ashequr Rahman, managing director of Midway Securities.
As large investors stayed away over the past two years, trading activity shifted to small-cap stocks with limited free float. Market insiders said a section of manipulators has been funnelling funds into such companies, inflating prices and turnover to book short-term capital gains. These stocks, with small free floats, are easier to push up in a liquidity-scarce market.
As a result, the revised index included nine weak-performing companies, such as Zeal Bangla Sugar Mills, while 13 firms were dropped, including BEXIMCO and Unilever Consumer Care. Analysts noted that Unilever’s fundamentals and accounting standards are far stronger than those of many newly included firms, but financial strength and transparency are not considered in index rebalancing.
Under the DSE methodology set by S&P Dow Jones Indices, stocks must maintain a six-month average daily turnover of at least Tk 1 million and a free float of Tk 100 million to remain in the benchmark. BEXIMCO and Unilever failed to meet the turnover threshold due to weak investor participation, while cumulative trading volumes helped speculative stocks secure a place in the index.
Although revised margin loan rules introduced in November tightened eligibility for marginable securities, turnover in junk stocks has remained high. With the benchmark delivering negative returns, large-cap stocks staying stagnant, and macroeconomic uncertainty persisting, investors have increasingly shifted to speculative counters in search of gains.
In a stable market, blue-chip stocks typically dominate turnover. For now, however, thin liquidity and investor caution continue to tilt trading activity—and the DSEX—towards weaker stocks.
The newly included companies in the revised DSEX are Bangladesh Welding Electrodes, DESCO, Dulamia Cotton Spinning Mills, Hwa Well Textiles (BD), Northern Islami Insurance, Safko Spinnings Mills, Sharp Industries, Standard Ceramics, and Zeal Bangla Sugar Mills. Among them, Dulamia Cotton Spinning Mills reported liabilities far exceeding assets, while several others have posted losses for multiple years.
Apart from BEXIMCO and Unilever Consumer Care, five Islamic banks undergoing merger processes were also removed from the index, along with Apollo Ispat Complex, Union Capital, and Meghna Condensed Milk.
