DSE market P/E hits five-year low

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Tk 1,14,339cr wiped out from market capitalisation in 10 months

Staff Correspondent The market price-earnings ratio of the Dhaka Stock Exchange on Sunday hit five-year low of 13.47 as the stocks continued to lose value because of panic-driven sales by investors. Besides, Tk 1,14,339.51 crore have so far been wiped out from the DSEs market capitalisation since the market capitalisation hit the record high on December 5, 2010. DSE data released on Sunday showed that the bourses market P/E came down to 13.47 on Sunday when the benchmark general index of DSE crashed to a 21 months low of 5,077.12 points. The bourses market capitalisation also came down to Tk 2,53,731.91 crore on Sunday from its peak of Tk 3,68,071.41 recorded on December 5, 2010 when the general index rose to a record high of 8,918.51 points. After October 2006, the peak ratio came to this lucrative level for investment for the first time due mainly to a continuous downtrend in share prices. The market P/E of DSE was 13.25 in October, 2006 and the highest P/E of the bourse was 29.71 in November 2010 when the market was booming.

The P/E ratio means a valuation ratio of a companys current share price compared to its earnings per share. The lower P/E means less risk in making investment. Although the bourses market P/E, which determines the risks an investment might entail came down to such a low and attractive level that investors are reluctant to make any investment because of lack of confidence on the market, especially due to the governments handling of the capital market, said market analysts. The market P/E of the DSE is now very attractive and the P/E is falling every day. Investors are reluctant to buy any share, rather they are selling out shares to get out from the market because of lack of confidence, said an analyst. He blasted the government, especially the finance minister AMA Muhith, for the current market situation. Muhith has repeatedly been saying he does not know how to tackle the current crisis in the stock market. If a finance minister makes such remarks, how the investors will get confidence, he asked. As per the DSE data, the weighted market P/E of the bourse was 17.28 in 2006-2007 and 22.80 in 2007-2008. It was 18.44 in 2008-2009 and 24.08 in 2009-2010. The DSEs market P/E in 2010-2011 came down to 16.55 after the stocks suffered the first crash in recent years in January-March. Former adviser to the interim government Mirza Azizul Islam told New Age that the investors should immediately stop panic selling and buy fundamentally strong scrips as the P/E of the market was very attractive. The investors should invest in good scrips for long-term and take dividends, he said.