Don’t worry, focus on the good deeds

“The financial market is very cyclical in nature. This means that when money is cheap and the interest rate is low, the flow of liquidity generally remains robust.”

Investors should focus on stocks with good fundamentals instead of betting on speculative stocks and worrying too much about the global scenario and their impacts on the market, said Shekh Mohammad Rashedul Hasan, Managing Director of UCB Asset Management.

“The financial market is very cyclical in nature. This means that when money is cheap and the interest rate is low, the flow of liquidity generally remains robust.”

This was seen during the pandemic of 2020 and 2021, when people were sitting on idle money but had little room to invest. As a result, there has been healthy cash flow in the stock market.

“There was a time when liquidity was in our favour. Today, the liquidity situation is not as favorable as it has been for the past two years. It will take time.”

The liquidity situation was better in 2017 and tightened in 2018 and 2019 before improving over the following two years.

“It’s cyclical and there’s no need to worry,” said Hasan, who earned his bachelor’s degree from Bangladesh University of Engineering and Technology and an MBA from the Institute of Administration. of Business from the University of Dhaka.

He says liquidity in the market has dried up due to rising import costs, rising shipping costs and rising inflation. While the economy is running at full speed, no economic activity has been looked back.

He cites two factors driving the market forward: liquidity and good corporate earnings growth.

“If companies are doing good business, then liquidity will automatically flow to the market.”

Cash flow was expected to slow as the economy reopens after the pandemic recedes and interest rates gradually rise.

“It’s very natural in the cyclical financial market,” Hasan said.

According to the investment manager, the price of raw materials used by many listed companies is directly linked to the world price of oil. So when the price of oil is low, their profit margin is high and vice versa.

“But that’s the nature of business – one year you’re making a profit, but the next year you’ll be making lower profits and even incurring losses. But with the economy reopening, businesses won’t have difficulty in recording higher profits.”

But people are worried about whether profits will be cut and corporate overheads will rise due to rising inflation. Businesses may need to raise wages and salaries to help employees cope with the impact of inflation. This can hurt their profitability.

Investors are also worried about the rise in the overnight cash rate.

“But what’s interesting is that businesses did well at the height of the pandemic when people thought they were going to suffer. I’m not saying businesses can’t have bad days. It can happen. But many investors worry too much.”

He says there are plenty of good companies that haven’t experienced significant rallies over the past year.

“These companies are doing quite well. But many investors have gotten into speculative investing. But speculative stocks have suffered the most when liquidity has been under pressure compared to companies with sound fundamentals. The companies with good fundamentals will show good performance for the future.”

If there are no supply chain disruptions and natural shocks such as cyclones and floods, the economy can continue to grow at a healthy pace.

“So I’m not worried,” Hasan said.

Some investors may want to cash in their shares before Eid to meet their expenses. But Hasan thinks the number of investors belonging to this group is not too large to have a major impact on the market.

During Ramadan, overall trading activities generally slow down and trading time is reduced. People’s activities are not so visible during the month of fasting.

“But that’s not the main reason for the recent market drop.”

Hasan hopes the flow of remittances will be better in the coming days as global economies have reopened and the number of workers heading overseas in search of jobs has increased.

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