DSEX Weekly Update: Lower Rates Support the Rebound, but Global Risks Persist

The DSEX closed the week at around 5,662 points, gaining roughly 6 points, or 0.11%, as the index held its recent recovery despite profit-taking pressure.

The rebound became more visible mid-week, with the DSEX gaining around 39 points on Tuesday and another 23 on Wednesday, while turnover crossed Tk700 crore in the final two sessions.

However, the market remained range-bound in the final session, suggesting that investors are still waiting for stronger confirmation before becoming aggressive.

Last week's analysis highlighted that the DSEX was testing support rather than confirming a new uptrend.

This week, the recovery has improved, but the key question remains: Can the rebound attract sustainable money flow, or will the market again face profit-taking near resistance?

“Let’s try to find the answer by analysing the key factors shaping the market.”

Macroeconomic Factors

The government securities market continues to provide one of the more positive signals for equities.

The 2-year government bond rate declined to 8.8685% from 9.3900%, continuing the downward movement in short- and medium-term yields.

Bangladesh Bank's latest auction data also shows the 15-year and 20-year bond yields around the 9% level, confirming that the decline in government-security yields has extended beyond the short end of the curve.

This remains constructive for the stock market because lower risk-free returns can gradually improve the relative attractiveness of equities.

If the upcoming 5-year and 10-year securities also move toward or below 9%, it could provide additional support to equity valuations.

However, lower domestic yields should not be interpreted as an automatic liquidity trigger. Rising global yields and renewed inflation concerns could create pressure on the broader rate environment.

Internal Factors

The approval of the 9th National Pay Scale is one of the most important domestic developments from last week.

The government approved salary increases of up to 142%, with implementation taking place in three phases.

Around 33 lakh people are expected to benefit from the new structure.

From a market perspective, the impact is mixed.

Higher government salaries could increase disposable income and consumption, potentially supporting businesses exposed to domestic demand.

At the same time, the additional fiscal burden is significant, while Bangladesh is already dealing with elevated inflation and weak revenue collection.

The additional cost of the new pay structure is estimated at around Tk105,580 crore.

Therefore, the market may initially view the pay-scale decision positively, but investors will closely watch whether the additional purchasing power creates further inflationary pressure.

The energy situation remains another important internal concern. The government has acknowledged the continuing power and gas shortages and expects the situation to improve, but the problem has not disappeared.

Limited LNG storage capacity has been identified as one of the reasons behind the recent gas crisis.

For the equity market, this remains particularly important because companies in energy-intensive industries may continue to face production interruptions and higher operating costs.

External Factors

The external picture has become more challenging compared with last week's update.

The US-Iran conflict has entered another escalation phase, and Brent crude closed around $96.28 per barrel after gaining 7.6% during the week.

The renewed tension around the Middle East and disruptions to transportation routes have brought energy-inflation concerns back to the forefront.

This is particularly important for Bangladesh because higher crude prices can increase the country's import costs and put additional pressure on inflation, energy costs and the balance of payments.

At the same time, global bond yields have moved higher again. The US 10-year Treasury yield reached around 4.79%, while rising oil prices have strengthened expectations of continued inflationary pressure and potentially tighter monetary policy.

Therefore, the external environment is no longer as supportive as it appeared during the previous week's decline in crude prices.

Regulatory Affairs

The banking sector continues to receive policy support, although investors will need to distinguish between liquidity support and actual improvement in asset quality.

Sammilito Islami Bank has started accepting applications from depositors, with verified customers scheduled to receive their principal from 7 September.

Nearly 18,000 customers applied to withdraw around Tk1,300 crore, although this represents only a small proportion of the bank's overall customer base.

This could provide some short-term relief to depositors and confidence in the resolution process.

However, the broader banking sector still faces significant challenges, particularly high non-performing loans.

Meanwhile, Bangladesh Bank is preparing to disburse 25% of its low-cost pre-finance schemes this month, with full disbursement expected by December.

Agriculture and SMEs have been given priority, and the central bank expects the broader economic impact to become visible next year.

If the funds are channelled effectively into productive activities, the programme could support economic activity, bank lending and corporate earnings over the medium term.

TA Factor

Technically, the market has improved compared with last week.

The DSEX has recovered from the earlier correction and has managed to hold above the 5,620–5,640 immediate support zone identified in the previous update.

The rise in turnover toward Tk700+ crore during the recovery sessions is also encouraging, as it suggests that participation is improving.

However, the market has not yet delivered a decisive breakout.

The next important area to watch remains around 5,696–5,720, followed by the stronger resistance zone near 5,786–5,828.

A sustained move above the latter zone with stronger volume would provide much stronger confirmation that the recovery has developed into a broader uptrend.

On the downside, 5,620–5,640 remains the immediate support area. A break below this zone would again raise the probability of a move toward the stronger 5,555–5,520 support zone identified in the previous analysis.

The key difference this week is therefore not simply the direction of the index, but whether volume and money flow can support the next move.

Investor Focus This Week

The market is gradually moving away from the earlier correction, but the recovery remains selective rather than fully confirmed.

Lower domestic bond yields, the new pay scale, banking-sector support and Bangladesh Bank's financing initiatives are providing positive signals.

On the other hand, higher crude oil prices, renewed US-Iran tensions, global bond-yield pressure, inflation risks and the unresolved energy situation remain important obstacles.

Sector rotation will therefore be important. The recently strong textile sector may face further profit-taking, while insurance stocks could also come under pressure after their recent movement.

The banking sector may remain important if both price and volume continue to improve. Non-cyclical sectors like Pharmaceuticals, Food, and sectors like IT and Telecommunications could also attract attention because of their relatively lower direct exposure to the current energy-supply disruption.

Weekly Zist

The DSEX has moved from correction toward recovery, but the rebound is still waiting for confirmation.

The combination of falling domestic bond yields and improving turnover is encouraging, but the renewed rise in crude oil and global bond yields has brought back macroeconomic risks.

For now, the market may remain in a recovery-and-rotation phase rather than a confirmed broad-based uptrend.

The next move above 5,696–5,720 will be important—but a sustained break above 5,786–5,828 with stronger volume would be the real confirmation that the DSEX recovery is becoming more reliable.

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