Rising Interest Rates and Stagnant Stock Market in Bangladesh

Rising Interest Rates and Stagnant Stock Market in Bangladesh

Nov 2023

Interest rates are on the rise. They were around 12~13% in 2012-2013.

The absolute number is not the issue. As the prevailing consensus is that rates are likely to rise, funds are likely to move to the Money Market to take advantage of relatively low-risk returns.

Let us hypothesize that rates would stabilize around 13% (unlucky number!). At some point in future, rates are likely to fall. Say they fall steadily from 13% to 10%. When the prevailing consensus will be that rates are likely to fall further, markets will look for alternative options.

At that time, some equities with yield around 7~9% will likely make them an attractive alternative option. Furthermore, some under-valued stocks would imply around 20~30% return in 2-3 years which would attract investment. Later on, once easy money is in place, a bullish rally might ensue . . .

 

What is the Technical view of the charts?

Technical Analysis of DSE-X index.

It seems the Index is in ABC correction mode.

A could be taken from Oct 2022 High ~ 7410 to 5963 in July 2023 = roughly 1,447 points down.

After that, we are seeing low volatility movement - at times around 70~100 stocks participate in this counter-trend. We could call this "B" with a High of 6677 (which retraced just below 50% of A).

Theoretically speaking, we are waiting to see Wave C down (but Floor price is interfering for the time being). Moreover Wave C is pending in many stocks. Let us see what happens . . .