Bangladesh Market Update Stocks Edge Higher as Inflation Concerns Persist

Dhaka, Bangladesh – Bangladesh’s stock market opened the week with modest gains, as the Dhaka Stock Exchange (DSE) benchmark index, the DSEX, rose 0.3% in early trading on Monday. The uptick was driven by buying interest in textile and pharmaceutical sectors, with investors cautiously optimistic ahead of key economic data releases. The DSEX closed at 5,423 points, recovering slightly from last week’s losses, as market participants weighed domestic inflation trends against global commodity price fluctuations.

According to market analysts, the rally was supported by a drop in yields on government treasury bills, which fell by 5 basis points to 9.2% for the 91-day bill in the latest auction, signaling improved liquidity in the banking system. The Bangladesh Bank has maintained a tight monetary policy stance, keeping the repo rate at 8.5% to combat inflation, which remained elevated at 9.7% in January, down from 10.1% in December. This has led to cautious trading, with many investors shifting focus to defensive stocks.

The textile sector, a key driver of Bangladesh’s export economy, saw gains of up to 1.2%, aided by a slight depreciation of the taka against the US dollar, which fell to 110.5 BDT per USD, making exports more competitive. However, the ready-made garment (RMG) industry faces headwinds from rising energy costs and a potential slowdown in orders from European buyers due to recession fears. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) reported a 5% decline in export orders for the first quarter of 2025 compared to the same period last year.

On the global front, international markets showed mixed trends. The Dow Jones Industrial Average fell 0.4% on Friday, while European indices like the FTSE 100 edged up 0.2%. Oil prices remained volatile, with Brent crude hovering at $82 per barrel, down from $85 a week ago, as concerns over demand from China weighed on the market. This has provided some relief for Bangladesh, which imports nearly all its oil, but the impact on domestic fuel prices remains limited due to government subsidies.

The Bangladesh Bank is expected to release its latest inflation report later this week, which could influence market direction. Analysts predict a marginal decline in headline inflation, but core inflation may remain sticky due to high food prices. The central bank has also been actively managing foreign exchange reserves, which stood at $24.5 billion as of February, down from $26 billion in December, partly due to debt servicing and import payments.

In currency markets, the taka has stabilized after a period of depreciation, with the interbank rate remaining steady. The Bangladesh Bank has intervened to support the currency, selling around $50 million in the foreign exchange market last week. Remittance inflows, a key source of foreign currency, rose 10% year-on-year in January to $2.1 billion, providing some buffer.

Looking ahead, market participants are closely monitoring the upcoming budget for the fiscal year 2025-26, which is expected to be presented in June. The government has signaled a focus on infrastructure spending and social safety nets, but fiscal consolidation remains a challenge due to revenue shortfalls. The National Board of Revenue (NBR) reported a 12% increase in tax collection in the first seven months of the fiscal year, but it still lags behind the target by 8%.

In the corporate sector, several companies have announced dividend announcements for the second quarter, with a few textile firms declaring higher payouts due to improved profitability. However, the overall earnings season has been mixed, with some pharmaceutical companies reporting lower margins due to rising input costs.

Overall, the Bangladesh market remains in a wait-and-see mode, with investors balancing domestic inflationary pressures against external uncertainties. The DSE is expected to trade within a narrow range this week, with key support at 5,300 and resistance at 5,500 points. Analysts advise caution, recommending a focus on fundamentally strong stocks with low debt levels.