Dhaka, Bangladesh (BBN) – The market price-earnings ratio (P/E) of the country’s prime bourses –Dhaka Stock Exchange (DSE) – on Sunday hit five-year low of 13.47 as the stocks continued to lose value because of panic-driven sales by investors.
The bourse’s 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 New Age, a local newspaper, reported quoting DSE data.
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 company’s current share price compared to its earnings per share. The lower P/E means less risk in making investment.
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 DSE’s market P/E in 2010-2011 came down to 16.55 after the stocks suffered the first crash in recent years in January-March.
The bourse’s market capitalization also came down to BDT 2,53,7.3191 billion on Sunday from its peak of BDT 3,68,071.41 recorded on December 5, 2010 when the general index rose to a record high of 8,918.51 points.
Former adviser to the interim government Mirza Azizul Islam told the newspaper 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 noted.
BBN/SSR/AD-31Oct11-12:32 pm (BST)