The government will place a bill in parliament during the current session to enact a law introducing share buyback system in an effort to “save” the investors in the falling market.
Finance Minister AMA Muhith Sunday said this Sunday in the House while describing various government measures to boost the share market in the wake of recent crash.
During the question hour session, a number of lawmakers voiced concern over the recent turmoil in the stock market causing sufferings to a huge number of small investors. They also enquired into the government moves to address the situation.
In response, the finance minister informed the House about the government’s ongoing and future measures including enactment of share buyback law to regain confidence of the small investors.
If the buyback law is passed, a company can buy back its own shares held by the public either to increase the share value or to eliminate threats by shareholders who may be looking for controlling stake.
Reasons for buybacks include putting unused cash to use, raising earnings per share, increasing internal control of the company, and obtaining stock for employee stock option plans or pension plans.
The Dhaka Stock Exchange (DSE), the country’s prime bourse, moved in early 2009 for introduction of buyback law but failed.
The finance minister also explained some reasons behind the recent unrest in the share market as he said many small investors invested in the market to gain within short time without any prior knowledge on the capital market. They believed they would get profit by investing in the share market, he said.
Besides, share prices of some companies were overpriced illogically, he said.
The minister said no-one sells their shares when the market is up, but they start selling shares in a panicky situation when the market witnesses a downtrend.
“And what can we do in this situation? We don’t find any reason behind their behaviour,” the minister added.
He said one lakh investors entered the share market after its fall for making profit by manipulating the market. “They should be punished,” he said.
The minister said the government is monitoring the situation in the capital market round the clock.
About the probe body investigating the share market crash, he said the committee may submit an interim report on their findings and the government will also publish it.
The finance minister expressed resentment at a supplementary question raised by independent lawmaker Fazlul Azim, who said the country’s economic situation is in a “bad state”.
“The country is suffering from power and gas crises. New industries are not getting power and gas connections. Prices of essentials are spiralling. Share market has collapsed. The overall economic situation is fragile. I want to know the government measures to improve the country’s economy amid all these,” Azim said in a supplementary question.
Azim in his scripted question wanted to know whether new branches of scheduled banks will be set up in Noakhali district.
In response, the finance minister sharply reacted to Azim’s statement about the economy.
“I will not reply to his question. The original question was on setting up branches of state-owned banks in his constituency. He always speaks thousands taking the opportunity during question-answer hour,” Muhith said.
“His tongue should be controlled. His statement should be expunged from parliament proceedings,” the finance minister said.
Speaker Abdul Hamid said an MP can ask any question to the minister. But he will have to submit notices in some cases in advance seeking answer to his questions.
Read the original story on The Daily Star
Sunday, February 27, 2011
Stockmarket M&M’s
The volatility in Bangladesh’s capital markets shows few signs of abating as does the extensive discussion in the media about the causes, consequences and cures for the current price correction. Today’s article does not attempt to tell our readers when the sell-off will end, we will leave that for other market forecasters. But rather we wanted to explore stockmarket “M&M’s”, not related to America’s favourite candy, but rather the two issues of “Manipulation” and “Moral Hazard”. The former seems to be receiving all the attention from both the media, and, perhaps more significantly, regulators. However, we would argue the latter is perhaps the bigger risk to the healthy development of our capital markets. There seems to be a widely held view both among the protesters (perhaps they see themselves as market vigilantes?) on the streets around the DSE in Motijheel as well as some officials that the exceptional rise in the market in 2010 and the subsequent correction in the past month have taken place as a result of “market manipulators” or “syndicates” who lured unsuspecting retail investors into buying the market and subsequently pulled all their money out causing a collapse.
The growing backlash among the massive wave of new retail investors (BO accounts have increased by almost three million in the last four years) also makes capital market reforms an increasingly important social and political issue. This has resulted in the increasing politicisation of the discussion on the stockmarket. There is an excessive focus on witch hunts and finding scapegoats, thereby diverting the focus away from an impartial analysis of what happened, why it happened and what needs to be done to avoid it happening in the future.
Our summary assessment of the main drivers of the four year bull run in the stockmarket in order of importance are as follows: 1) excess liquidity growth with broad money (M2) expanding by more than 20 percent last fiscal year and once again this year; 2) a structural increase in retail investors holders from 0.5 million around three years ago, to 3.21 million by end of 2010; 3) lack of supply/IPOs with only six IPOs and two direct listings in 2010 and limited issuance in 2009; 4) excessive investment by commercial banks in the capital markets. Direct investment with financial institutions exposure increasing more than eight-fold since 2006 to about Tk 45 billion in 2009, further increasing in 2010; and 5) frequent regulatory interventions in support of stock price index increasing moral hazard.
We fully support the current initiative of the government to investigate the recent stockmarket turmoil and identify operators, if any, responsible for unlawful market activities. We would argue that the term “market manipulation” needs to be more clearly and comprehensively defined legally as well as in the regulatory framework. There is nothing illegal about buying stocks and then selling at a profit. We have to understand that all investors (small, large and institutional) are in the stockmarket to make profit and there is absolutely nothing wrong with that. There needs to be a clear distinction between investing for profit and making profit through spreading rumours to push up prices and then sell or engaging in insider trading. The authorities need to ensure the latter ones do not happen and prosecute those that engage in such activities.
“Moral Hazard” is an important concept widely used in economics literature. It is the idea that individuals or institutions can alter their behaviour if they know they are insured against some unfavourable outcomes. By reinforcing a sense that the government either can or indeed should support or even guarantee the level of prices in the stockmarket, the regulators are at risk of what economists call moral hazard, or sending out signals that encourage inappropriate decision making or risk taking. Specifically investors will be inclined to run larger exposures to the stockmarket than otherwise on the view that the authorities will always come in and support the market in any major decline. This is true not only for unsophisticated retail investors but also larger institutional investors such as banks and funds. In the US there has been talk of the “Greenspan Put Option” by which the Federal Reserve was perceived to be willing to cut interest rates to support the stockmarket. In Bangladesh we have seen much more direct interventions and policies to support stock price levels.
Excessive ad-hoc regulatory interventions in response to market developments also distort price movements and reduce the incentives for investors to buy stocks on the basis of fundamentals since unfavourable price trends might be unduly affected by official interventions.
One might also argue that repeated market support interventions, which are ultimately likely to fail, also risks fuelling greater social unrest to the extent that investors believe that the government has broken some form of implicit “contract” to protect against excessive market declines. In the recent market turmoil we have seen repeated occasions where retail investors have expressed surprise that the stock prices with good fundamentals can actually decline.
Space constraints limit the extent to which we can discuss in detail potential capital-markets reforms which we believe should be considered by the authorities. But some recommendations include: strengthening the capacity of the SEC in market surveillance; improved regulation and enforcement; transparent balance sheets/lessons from Sarbanes Oxley; taxation of capital gains: more fundamental research; and the need for training of professional market participants through a range of programmes under the newly established Capital Market Institution.
There are other issues: the need for improved regulation in respect of accounting rules; transparency issues; governance structure and reporting requirements; criteria for determining insider trading; rules for dealing with market sensitive information/announcements; and sanctions (criminal and financial) for violations of the rules and regulations. These reform issues would need to be looked at by competent professionals with extensive international experience with possible technical support from the IFC and/or ADB.
There is a also a clear need to stimulate increased equity issuance in Bangladesh including fairer IPO pricing with the re-adoption of the book-building method; regulations and tax incentives for increased free float; the listing of state-owned enterprises; and the development of a mechanism whereby companies can raise the capital they need and meet free float requirements.
We also recommend the government and regulators think carefully about commercial banks’ exposure to the capital market (Are the limits at 10 percent of liabilities or 25 percent of capital too high?), ensure more regular co-ordination between Bangladesh Bank and SEC on stockmarket policies, and assess the impact of the market correction on the real economy.
But our conclusion would be that there is no quick solution for the current market correction. Any market sell-off of 30 percent after a 400 percent gain can only be termed a “correction” and not a “crash”. That is not to say that we do not have sympathy for investors who got into the market rally late and are facing losses. But the reality is no government or regulator in history has sustainably managed asset prices corrections when a bubble has burst. However, it will find its own natural equilibrium when the prices have been corrected and price/earnings ratios have declined to levels that are fundamentally attractive to both domestic and, as importantly international investors. The latter might be a key swing variable as foreigners only hold 1 percent of the market and more favourable valuations versus other regional markets might well persuade them to invest.
We understand why the government feels obligated to intervene to support the market. We have seen from the recent global financial crisis that getting the balance right in market regulation and intervention has proved challenging for the Federal Reserve and other central banks and governments in the developed economies. The main criteria for public sector intervention should be based on the systemic nature of the crisis. Until now there is no indication that the stockmarket correction in Bangladesh is posing a systemic risk to the rest of the financial system or the real economy. If anything, the excess liquidity circulating in the economy may pose a greater risk for inflation and foreign exchange market stability. Loose monetary policy, which was the root cause of the bubble, coupled with further liquidity injections through market interventions, may very well lead to other major problems including macroeconomic instability. Moreover, if further market support operations prove to be temporary then retail investors may feel a greater sense of being given false ground for optimism. Unwarranted market intervention is not just a market of moral hazard but runs potential political risks as well.
Read the original story on The Daily Star
The growing backlash among the massive wave of new retail investors (BO accounts have increased by almost three million in the last four years) also makes capital market reforms an increasingly important social and political issue. This has resulted in the increasing politicisation of the discussion on the stockmarket. There is an excessive focus on witch hunts and finding scapegoats, thereby diverting the focus away from an impartial analysis of what happened, why it happened and what needs to be done to avoid it happening in the future.
Our summary assessment of the main drivers of the four year bull run in the stockmarket in order of importance are as follows: 1) excess liquidity growth with broad money (M2) expanding by more than 20 percent last fiscal year and once again this year; 2) a structural increase in retail investors holders from 0.5 million around three years ago, to 3.21 million by end of 2010; 3) lack of supply/IPOs with only six IPOs and two direct listings in 2010 and limited issuance in 2009; 4) excessive investment by commercial banks in the capital markets. Direct investment with financial institutions exposure increasing more than eight-fold since 2006 to about Tk 45 billion in 2009, further increasing in 2010; and 5) frequent regulatory interventions in support of stock price index increasing moral hazard.
We fully support the current initiative of the government to investigate the recent stockmarket turmoil and identify operators, if any, responsible for unlawful market activities. We would argue that the term “market manipulation” needs to be more clearly and comprehensively defined legally as well as in the regulatory framework. There is nothing illegal about buying stocks and then selling at a profit. We have to understand that all investors (small, large and institutional) are in the stockmarket to make profit and there is absolutely nothing wrong with that. There needs to be a clear distinction between investing for profit and making profit through spreading rumours to push up prices and then sell or engaging in insider trading. The authorities need to ensure the latter ones do not happen and prosecute those that engage in such activities.
“Moral Hazard” is an important concept widely used in economics literature. It is the idea that individuals or institutions can alter their behaviour if they know they are insured against some unfavourable outcomes. By reinforcing a sense that the government either can or indeed should support or even guarantee the level of prices in the stockmarket, the regulators are at risk of what economists call moral hazard, or sending out signals that encourage inappropriate decision making or risk taking. Specifically investors will be inclined to run larger exposures to the stockmarket than otherwise on the view that the authorities will always come in and support the market in any major decline. This is true not only for unsophisticated retail investors but also larger institutional investors such as banks and funds. In the US there has been talk of the “Greenspan Put Option” by which the Federal Reserve was perceived to be willing to cut interest rates to support the stockmarket. In Bangladesh we have seen much more direct interventions and policies to support stock price levels.
Excessive ad-hoc regulatory interventions in response to market developments also distort price movements and reduce the incentives for investors to buy stocks on the basis of fundamentals since unfavourable price trends might be unduly affected by official interventions.
One might also argue that repeated market support interventions, which are ultimately likely to fail, also risks fuelling greater social unrest to the extent that investors believe that the government has broken some form of implicit “contract” to protect against excessive market declines. In the recent market turmoil we have seen repeated occasions where retail investors have expressed surprise that the stock prices with good fundamentals can actually decline.
Space constraints limit the extent to which we can discuss in detail potential capital-markets reforms which we believe should be considered by the authorities. But some recommendations include: strengthening the capacity of the SEC in market surveillance; improved regulation and enforcement; transparent balance sheets/lessons from Sarbanes Oxley; taxation of capital gains: more fundamental research; and the need for training of professional market participants through a range of programmes under the newly established Capital Market Institution.
There are other issues: the need for improved regulation in respect of accounting rules; transparency issues; governance structure and reporting requirements; criteria for determining insider trading; rules for dealing with market sensitive information/announcements; and sanctions (criminal and financial) for violations of the rules and regulations. These reform issues would need to be looked at by competent professionals with extensive international experience with possible technical support from the IFC and/or ADB.
There is a also a clear need to stimulate increased equity issuance in Bangladesh including fairer IPO pricing with the re-adoption of the book-building method; regulations and tax incentives for increased free float; the listing of state-owned enterprises; and the development of a mechanism whereby companies can raise the capital they need and meet free float requirements.
We also recommend the government and regulators think carefully about commercial banks’ exposure to the capital market (Are the limits at 10 percent of liabilities or 25 percent of capital too high?), ensure more regular co-ordination between Bangladesh Bank and SEC on stockmarket policies, and assess the impact of the market correction on the real economy.
But our conclusion would be that there is no quick solution for the current market correction. Any market sell-off of 30 percent after a 400 percent gain can only be termed a “correction” and not a “crash”. That is not to say that we do not have sympathy for investors who got into the market rally late and are facing losses. But the reality is no government or regulator in history has sustainably managed asset prices corrections when a bubble has burst. However, it will find its own natural equilibrium when the prices have been corrected and price/earnings ratios have declined to levels that are fundamentally attractive to both domestic and, as importantly international investors. The latter might be a key swing variable as foreigners only hold 1 percent of the market and more favourable valuations versus other regional markets might well persuade them to invest.
We understand why the government feels obligated to intervene to support the market. We have seen from the recent global financial crisis that getting the balance right in market regulation and intervention has proved challenging for the Federal Reserve and other central banks and governments in the developed economies. The main criteria for public sector intervention should be based on the systemic nature of the crisis. Until now there is no indication that the stockmarket correction in Bangladesh is posing a systemic risk to the rest of the financial system or the real economy. If anything, the excess liquidity circulating in the economy may pose a greater risk for inflation and foreign exchange market stability. Loose monetary policy, which was the root cause of the bubble, coupled with further liquidity injections through market interventions, may very well lead to other major problems including macroeconomic instability. Moreover, if further market support operations prove to be temporary then retail investors may feel a greater sense of being given false ground for optimism. Unwarranted market intervention is not just a market of moral hazard but runs potential political risks as well.
Read the original story on The Daily Star
One lakh new investors enter share market for manipulation in Bangladesh: Muhith
The Finance Minister, Abul Mal Abdul Muhith, on Sunday told the Jatiya Sangsad that the government has taken an initiative to enact a law with the provision for compelling the companies to buy shares of specific amount from the capital market through by-back system when the price of share would fall.
He also said that about one lakh investors who entered the capital market during the debacle came to the market for earning huge profit through ‘manipulation’.
‘We have a taken the initiative to enact the law and the bill in this regard will be placed before the House in the current session,’ said the minister, replying to a question from ruling Awami League lawmaker Molla Jalal Uddin during the questions-answers session.
He also said that after enactment of the law the companies would not get the chance to go out of the market after earning huge profits.
Jalal drew the attention of the minister to some companies like KPCL and OCL saying that the companies earned huge profits from the market and now using the money in other businesses.
The AL lawmaker also pointed out that price of the primary share of these companies was Tk 300 and now the price stood at Tk 80 to Tk 90 as the companies were using the money to other purposes after selling out the shares.
Answering to another question from Abdur Rahman, he also said that about one lakh investors who entered the capital market during the debacle came to the market for earning huge profit through manipulation and the government would take punitive measures against them.
‘When the price falls we try to keep the market stable in various ways. But it is unfortunate the investors do not sell their shares at that time to overcome the loss,’ he said.
Replying to another question from Shamsul Haque, the minister said that the high-powered inquiry committee was working to find out the reasons behind the stock market debacle and it would submit an interim report if any important information is found in this regard.
The government had already taken some measures to check abnormalcy in the index of share market and some more initiatives would be taken for the small investors, said the minister replying to another question from Hossain Makbul Shahrier.
Answering to a question from Md Ishrafil Alam, the minister told the House that the total number of BO account holders was 33 lakh 54 thousands and 46 till January 17, 2011.
The minister, however, got irritated when independent lawmaker Fazlul Azim wanted to know about the government moves to bring pace in the country’s economy.
‘You always ask irrelevant questions. I will not answer it. Such question should be expunged,’ the minister said.
But the Speaker, Abdul Hamid, said that any question could be asked but notice should be issued for that in advance.
Read the original story on the daily New Age
He also said that about one lakh investors who entered the capital market during the debacle came to the market for earning huge profit through ‘manipulation’.
‘We have a taken the initiative to enact the law and the bill in this regard will be placed before the House in the current session,’ said the minister, replying to a question from ruling Awami League lawmaker Molla Jalal Uddin during the questions-answers session.
He also said that after enactment of the law the companies would not get the chance to go out of the market after earning huge profits.
Jalal drew the attention of the minister to some companies like KPCL and OCL saying that the companies earned huge profits from the market and now using the money in other businesses.
The AL lawmaker also pointed out that price of the primary share of these companies was Tk 300 and now the price stood at Tk 80 to Tk 90 as the companies were using the money to other purposes after selling out the shares.
Answering to another question from Abdur Rahman, he also said that about one lakh investors who entered the capital market during the debacle came to the market for earning huge profit through manipulation and the government would take punitive measures against them.
‘When the price falls we try to keep the market stable in various ways. But it is unfortunate the investors do not sell their shares at that time to overcome the loss,’ he said.
Replying to another question from Shamsul Haque, the minister said that the high-powered inquiry committee was working to find out the reasons behind the stock market debacle and it would submit an interim report if any important information is found in this regard.
The government had already taken some measures to check abnormalcy in the index of share market and some more initiatives would be taken for the small investors, said the minister replying to another question from Hossain Makbul Shahrier.
Answering to a question from Md Ishrafil Alam, the minister told the House that the total number of BO account holders was 33 lakh 54 thousands and 46 till January 17, 2011.
The minister, however, got irritated when independent lawmaker Fazlul Azim wanted to know about the government moves to bring pace in the country’s economy.
‘You always ask irrelevant questions. I will not answer it. Such question should be expunged,’ the minister said.
But the Speaker, Abdul Hamid, said that any question could be asked but notice should be issued for that in advance.
Read the original story on the daily New Age
Share probe body finds unethical practices: Khaled
The stock plunge probe committee chairman, Khondker Ibrahim Khaled, on Sunday said that they have found a number of unethical practices during the investigation but those could not be termed illegal under the current legal framework.
‘The questionable practices we have found were void of morality but were not illegal,’ he told reporters after meetings with the executive directors of the Securities and Exchange Commission.
‘We will point out the unethical issues regarding the findings in our report,’ he added.
Ibrahim Khaled also said that the four-member committee would revise the market data from 2009 to January 2011.
‘We are mostly focusing on the data of 2010. Some of the background data we would pick from the records of 2009,’ he said.
Read the original story on the daily New Age
‘The questionable practices we have found were void of morality but were not illegal,’ he told reporters after meetings with the executive directors of the Securities and Exchange Commission.
‘We will point out the unethical issues regarding the findings in our report,’ he added.
Ibrahim Khaled also said that the four-member committee would revise the market data from 2009 to January 2011.
‘We are mostly focusing on the data of 2010. Some of the background data we would pick from the records of 2009,’ he said.
Read the original story on the daily New Age
Four SCBs, ICB asked again to purchase shares to cool Bangladesh stock market
Ahmed Shawki
The government on Sunday asked four state-run banks and the Investment Corporation of Bangladesh again to purchase shares with the funds from their own capital to stabilise the volatile stock market.
Experts and general investors, however, observed that the latest directive of the government might not yield any positive result as a similar move of the government two weeks back had failed.
‘I don’t think any financial organisation will invest money from their own funds in a falling market,’ said an expert.
The Dhaka Stock Exchange in a post on its web site on Sunday said that the government ordered Sonali, Janata, Agrani and Rupali banks and ICB to buy shares from the two bourses in the country.
The government earlier issued similar order to state-run banks and allocated a Tk 600-crore fund to ICB in three instalments for the same purpose.
A senior official of ICB on Sunday told New Age that they were almost out of funds allocated by the government as they had already invested more than 90 per cent of the total allocation and would have to bear a severe pressure to meet the order yet again.
‘We have already finished the first two instalments and only 25 per cent of the second instalment remained in our hand,’ he said.
The state-run banks are also in a tight spot with their investment in the stock market as the prices of the stocks are going down continually, he said.
The market experts questioned the practicability of such directive like asking financial institutions to invest in the market. They considered such directives futile and useless as they claimed the amount demanded to stabilise the market are hardly bearable by any institution.
Salahuddin Ahmed Khan, a former chief executive officer of DSE, said, ‘The amount of investment needed to stabilise the market can only be met if the government invests itself,’
‘The institutions are also suffering from credit crunch. As they also run with a commercially viable motive, pressuring them would not change the faltering scenario,’ he explained.
The general investors seem sceptic and aggravated following the announcement of the directive as they think such declaration ineffective.
The investors on Sunday blasted the government for its failure to stabilise the stock market and also questioned its sincerity in the issue.
Many retail investors claimed that the government did not have any genuine intention to stabilise the market and it seemed that the government enjoyed the sufferings of the general investors.
Selim, an investor standing in front of the DSE building said, ‘When the government makes such announcement, we believe it and count on it. But they take the advantage of our trust on its decision.’
‘The government better not test our patience any more,’ he warned.
The general index of the DSE collapsed by 337.58 points, or 5.81 per cent, to close at its 10-month low at 5,463.35 points on Sunday.
The DSE index had also suffered a loss of 125.41 points, or 2.12 per cent, to close at 5,800.94 points in the past week after the government announced measures to stabilise the market.
Read the original story on the daily New Age
The government on Sunday asked four state-run banks and the Investment Corporation of Bangladesh again to purchase shares with the funds from their own capital to stabilise the volatile stock market.
Experts and general investors, however, observed that the latest directive of the government might not yield any positive result as a similar move of the government two weeks back had failed.
‘I don’t think any financial organisation will invest money from their own funds in a falling market,’ said an expert.
The Dhaka Stock Exchange in a post on its web site on Sunday said that the government ordered Sonali, Janata, Agrani and Rupali banks and ICB to buy shares from the two bourses in the country.
The government earlier issued similar order to state-run banks and allocated a Tk 600-crore fund to ICB in three instalments for the same purpose.
A senior official of ICB on Sunday told New Age that they were almost out of funds allocated by the government as they had already invested more than 90 per cent of the total allocation and would have to bear a severe pressure to meet the order yet again.
‘We have already finished the first two instalments and only 25 per cent of the second instalment remained in our hand,’ he said.
The state-run banks are also in a tight spot with their investment in the stock market as the prices of the stocks are going down continually, he said.
The market experts questioned the practicability of such directive like asking financial institutions to invest in the market. They considered such directives futile and useless as they claimed the amount demanded to stabilise the market are hardly bearable by any institution.
Salahuddin Ahmed Khan, a former chief executive officer of DSE, said, ‘The amount of investment needed to stabilise the market can only be met if the government invests itself,’
‘The institutions are also suffering from credit crunch. As they also run with a commercially viable motive, pressuring them would not change the faltering scenario,’ he explained.
The general investors seem sceptic and aggravated following the announcement of the directive as they think such declaration ineffective.
The investors on Sunday blasted the government for its failure to stabilise the stock market and also questioned its sincerity in the issue.
Many retail investors claimed that the government did not have any genuine intention to stabilise the market and it seemed that the government enjoyed the sufferings of the general investors.
Selim, an investor standing in front of the DSE building said, ‘When the government makes such announcement, we believe it and count on it. But they take the advantage of our trust on its decision.’
‘The government better not test our patience any more,’ he warned.
The general index of the DSE collapsed by 337.58 points, or 5.81 per cent, to close at its 10-month low at 5,463.35 points on Sunday.
The DSE index had also suffered a loss of 125.41 points, or 2.12 per cent, to close at 5,800.94 points in the past week after the government announced measures to stabilise the market.
Read the original story on the daily New Age
Dhaka stocks dip to 10-month low
Dhaka stocks continued to collapse on Sunday with the bourse’s general index hitting 10-month low as panic-stricken retail investors went for heavy sell-offs for the fourth day.
The government on the day again asked four state-run banks and the Investment Corporation of Bangladesh to purchase shares to stablise the market but the directive had little impact on the day’s trading.
The general index of the Dhaka Stock Exchange collapsed by 337.58 points, or 5.81 percent, to close at 10-month low at 5463.35 points on the day. The DGEN was at 5467.12 points on April, 18, 2010.
The DGEN shed a massive 926 points in last four trading days as panic spread among general investors while institutional investors took a wait-and-see policy to see the DGEN fall further to purchase shares at cheaper rates.
The DGEN, which started to wobble in December last year after large investors like banks and other financial institutions left the market taking huge profits, have so far lost 3455 points or 38.80 percent since it hit record 8918.51 points on December 5, 2010.
The market capitalisation also dropped by a whopping Tk 1,16,784 crore to stand at Tk 2,51287 crore on Sunday from Tk 368071 crore on December 5, 2010 as capital of many of the retail investors wiped out.
On Sunday, the bourse lost 140 points in five minutes as the floor opened while jittery investors continued with sell-offs to leave the market with whatever they have fearing further crash.
During the trading hours, the DSE posted a news on its website that said the government again ordered four state-run banks and the Investment Corporation of Bangladesh to buy shares from the securities market as a measure to stabilise the market.
But the daily turnover at the burse fell further to Tk 501.27 crore on Sunday from Tk 559.25 crore on Thursday.
The confidence of the investors hit the lowest ebb and as a result good dividend declaration by two non-bank financial institutions resulted in the plunge of share prices of the companies as the market lacked buyers for most of the issues.
Out of the total 255 issues traded on the day, prices of 249 issues plunged while only 6 advanced.
The retail investors, however, expressed their utter aggravation following the announcement of the government that the banks had been asked to buy shares.
They termed the government’s directives as ‘mockery’ and questioned their sincerity in order to stabilise the market.
‘It seem the government is enjoying to make us fools as we proved ourselves enough stupid to believe them,’ Anwar, a retail investors, shrugged.
The investors blasted the government for the empty words as government promises time and again resulted in utter disappointment among them.
Lutfar Rahman, one investor in front of the DSE building, said, ‘The banks do not even care about those orders as it comes from such worthless authority’.
Earlier on the second week of the month, the government had issued similar orders to the institutions as a wake up call following the extreme protest by the investors. The government also allocated a Tk 200 core fund to the ICB to buy shares from the market.
But in the last week, the DGEN had lost 125.41 points, or 2.12 percent on the week. The declining graph brought back
the jittery and anger among the retail investors and made them doubtful about the government measures.
Experts are considering such government directives and frequent orders pointless if those do not yield any result.
Salahuddin Ahmed Kahn, a finance teacher of Dhaka University, said, ‘The government better not embarrass itself by issuing such orders which would not come into effect.’
Salahuddin, who is also a former CEO of DSE, said the amount of investment demanded by the market to came into stability, can only be met if the government invests itself.
‘Otherwise, asking others to buy shares would really not help’ he added.
Read the original story on the daily New Age
The government on the day again asked four state-run banks and the Investment Corporation of Bangladesh to purchase shares to stablise the market but the directive had little impact on the day’s trading.
The general index of the Dhaka Stock Exchange collapsed by 337.58 points, or 5.81 percent, to close at 10-month low at 5463.35 points on the day. The DGEN was at 5467.12 points on April, 18, 2010.
The DGEN shed a massive 926 points in last four trading days as panic spread among general investors while institutional investors took a wait-and-see policy to see the DGEN fall further to purchase shares at cheaper rates.
The DGEN, which started to wobble in December last year after large investors like banks and other financial institutions left the market taking huge profits, have so far lost 3455 points or 38.80 percent since it hit record 8918.51 points on December 5, 2010.
The market capitalisation also dropped by a whopping Tk 1,16,784 crore to stand at Tk 2,51287 crore on Sunday from Tk 368071 crore on December 5, 2010 as capital of many of the retail investors wiped out.
On Sunday, the bourse lost 140 points in five minutes as the floor opened while jittery investors continued with sell-offs to leave the market with whatever they have fearing further crash.
During the trading hours, the DSE posted a news on its website that said the government again ordered four state-run banks and the Investment Corporation of Bangladesh to buy shares from the securities market as a measure to stabilise the market.
But the daily turnover at the burse fell further to Tk 501.27 crore on Sunday from Tk 559.25 crore on Thursday.
The confidence of the investors hit the lowest ebb and as a result good dividend declaration by two non-bank financial institutions resulted in the plunge of share prices of the companies as the market lacked buyers for most of the issues.
Out of the total 255 issues traded on the day, prices of 249 issues plunged while only 6 advanced.
The retail investors, however, expressed their utter aggravation following the announcement of the government that the banks had been asked to buy shares.
They termed the government’s directives as ‘mockery’ and questioned their sincerity in order to stabilise the market.
‘It seem the government is enjoying to make us fools as we proved ourselves enough stupid to believe them,’ Anwar, a retail investors, shrugged.
The investors blasted the government for the empty words as government promises time and again resulted in utter disappointment among them.
Lutfar Rahman, one investor in front of the DSE building, said, ‘The banks do not even care about those orders as it comes from such worthless authority’.
Earlier on the second week of the month, the government had issued similar orders to the institutions as a wake up call following the extreme protest by the investors. The government also allocated a Tk 200 core fund to the ICB to buy shares from the market.
But in the last week, the DGEN had lost 125.41 points, or 2.12 percent on the week. The declining graph brought back
the jittery and anger among the retail investors and made them doubtful about the government measures.
Experts are considering such government directives and frequent orders pointless if those do not yield any result.
Salahuddin Ahmed Kahn, a finance teacher of Dhaka University, said, ‘The government better not embarrass itself by issuing such orders which would not come into effect.’
Salahuddin, who is also a former CEO of DSE, said the amount of investment demanded by the market to came into stability, can only be met if the government invests itself.
‘Otherwise, asking others to buy shares would really not help’ he added.
Read the original story on the daily New Age
Stocks plunge for fourth day
A downtrend continued on the twin bourses for the fourth straight day although state-owned commercial enterprises were asked by the government to go into big buying to stabilise the stockmarket.
The benchmark General Index of Dhaka Stock Exchange (DGEN) shed 337 points, or 5.8 percent, to close at 5,463 points Sunday. The DSE general index lost a cumulative 924 points in four days of trading.
The selective price index of Chittagong Stock Exchange slumped 604 points, or 5.7 percent, to close at 9,953 points.
In the wake of a continuous downtrend, the government once again pressured the state-owned commercial banks to buy heavily into the markets in an effort to halt the bearish trend.
The government institutions are Sonali Bank, Janata Bank, Agrani Bank and the Investment Corporation of Bangladesh (ICB).
The government on February 15 provided Tk 200 crore to the state owned companies to buy shares to bring normalcy back to the market as well as to boost investor confidence.
Khondkar Ibrahim Khaled, chairman of Bangladesh Krishi Bank and former deputy governor of the Bangladesh Bank, held a meeting with the officials of the Securities and Exchange Commission to get their opinions on the current market trend.
Market insiders observed that most merchant banks, including big institutional investors, are incurring losses, so they have no buying power due to the credit crunch they are facing.
Some of small and institutional investors lurched into panic-selling as they anticipated another debacle in the stockmarket, they added.
A group of investors is trying to leave the market by selling all stakes of their portfolios, said a market operator. The government initiatives failed to stabilise the market, he added.
In different brokerage houses in Dhaka, investors complained that the government did not want to stabilise the market.
Salahuddin Ahmed Khan, who teaches finance at Dhaka University, said: “I don’t understand what the government wants with the capital market.” State-owned companies failed to steady the market as they do not have sufficient funds for big buying, he added.
Khan also said the government should make a big fund for the state owned companies, adding that most of the institutional investors also went for big selling of shares to leave the market.
Akter H Sannamat, a market analyst, said the credit crisis and lack of confidence pushed down the market.
The market declined across the board with banks, NBFIs, telecommunications and fuel and power shedding 6.2 percent, 6.1 percent, 7.6 percent and 3.94 percent respectively.
Of the total 255 issues traded on the DSE, 249 declined and six advanced, while daily turnover stood at Tk 501 crore, down by Tk 57.98 crore from the previous day.
Beximco topped the turnover leaders trading 98.17 lakh shares worth Tk 24.19 crore Sunday. The other turnover leaders were Prime Finance and Investment, Peoples Leasing and Financial Services, Bextex, Grameenphone, Union Capital, AB Bank, Southeast Bank, Titas Gas and Bay Leasing and Investment.
Asia Insurance was the highest gainer of the day, posting 8.07 percent rise in its share price, while the Mutual Trust Bank lost the most, as its share price shed 23.13 percent.
Read the original story on The Daily Star
Saturday, February 26, 2011
Panic returns as bearish run continues for fourth week
Ahmed Shawki
Retail investors became jittery again as the bearish run of the Dhaka Stock Exchange continued for the fourth week in the past week as all government measures to stabilise the market failed.
Market operators said liquidity crisis hit the market once again as the institutional investors remained reluctant to make investment aiming to purchase shares at cheap rates once the market falls further.
The benchmark general index of the DSE or DGEN lost 125.41 points, or 2.12 per cent, to close at 5,800.94 points in the past week as the panic-stricken retail investors went for heavy sell- offs fearing another debacle.
The trading on the bourse began on a positive note on Sunday with the DGEN gaining by a whopping 463.27 points, or 7.81 per cent, following a massive 346.85-point rise on February 15, the last trading day in the previous week. Finance minister Abul Maal Abdul Muhith’s ‘positive remarks’ inspired some of the investors to hold on to their stocks for the time being.
These abrupt rises generated a scope for many investors, who wanted to leave the market after the DGEN had fallen by around 1,100 points in the previous two weeks, to minimise their losses.
The selling pressure from retail investors willing to leave the market and the inactivity of the institutional investors grounded the expectation of the optimistic investors and made them more panicky and jittery.
As a result, the DGEN plunged by 216.23 points, or 3.38 per cent, on Tuesday. There was no trading on the burse on Monday on the occasion of the International Mother Language Day.
The retail investors intensified sale pressure on Wednesday as the index went down further by 154.90 points, or 2.50 per cent.
Following the declining trend of two days the general investors, who were still banking on the government assurance of stabilising the market, became terrified and went for heavy sell-offs on Thursday. The DGEN slid 217.54 points, or 3.61 per cent.
The slide of the DGEN in three days at a stretch, made many investors angry and frustrated about the government measures.
They blasted the government saying that the government’s ‘trick’ of stabilising the market with just ‘empty words and fancy directives’ will not work anymore.
Although the government asked the state-run commercial banks to purchase shares and allocated a Tk 200-crore fund to the Investment Corporation of Bangladesh, the measures failed.
Market operators said the banks and the ICB had bought a small volume of shares and their efforts were insufficient to stabilise the market.
They said that because of liquidity crisis, the average daily turnover on the DSE came down by 3 per cent to only around Tk 668 crore.
Out of the total 261 issues traded, 202 declined, 57 advanced and 2 remained unchanged.
Market operators said that the situation at the different brokerage houses remained volatile and the investors might explode in anger if the down-trend on the bourse continues this week.
Read the original story on the New Age
http://newagebd.com/newspaper1/business/9542.html
Tuesday, February 22, 2011
Law expert included in probe body
The government Tuesday appointed a counsel to the stock scam probe committee for assisting the body in legal matters.
"The government has appointed Nihat Kabir as the fourth member of the committee," head of the share market scam probe committee, Khondaker Ibrahim Khaled said.
Meanwhile, Mr Khondaker Ibrahim Khaled has said that the body will be able to complete the investigation process within the stipulated time-frame.
He said this while visiting Dhaka Stock Exchange (DSE) Tuesday. Two other members of the probe committe Taufiq Ahmed Chowdhury and Mohammad Abdul Baree were present.
Mr Ibrahim Khaled said that they have made significant progress in the inquiry.
" To complete the inquiry report within two months we have fixed up some priority areas," he added.
"Most of the general people want to know the reasons behind the unusual fall in the market. Our investigation also gives thrust to unearth the reason behind the recent crash, said Mr Khaled, also the Chairman of the Bangladesh Krishi Bank.
The probe committee was formed on January 25 last to investigate the recent unusual fall in the stock market which prompted frequent agitation among the investors of stock market in recent times .The committee was given two months time to complete its probe report.
During the visit, President Shakil Rizvi of DSE showed and briefed the probe committee on operational aspect of the DSE. He assured all kinds of cooperation to them.
Mr Shakil also supported the Finance Minister's view on 'forced sell' of the shares. Recently the Finance Minister commented that forced selling is 'unethical' and it will be stopped.
Meanwhile, the probe committee members on Tuesday sat with the members of the Capital Market Journalists Forum (CMJF). The members shared their opinion on the recent share scam with the probe committee.
Read the original story on the Financial Express
Dhaka stocks slip after two days of big gains
Dhaka stocks plunged more than three per cent Tuesday after two consecutive days of heavy gains amid profit taking and signs that market volatility remains a cause of concern, dealers said.
The benchmark DSE General Index (DGEN) slipped 3.38 per cent or 216.24 points to end at 6,173.39 as investors booked profit, resulting in an across-the-board price correction in major sectors.
The broader DSE All Shares Price Index (DSI) ended at 5,119.72, shedding 3.32 per cent or 175.88 points. Blue chips making up the DSE-20 index plummeted 5.26 per cent or 227.19 points to 4,094.58.
The market gained 130 points in the opening ten minutes but declined steadily throughout the session on profit taking in all sectors except the non-banking financials which gained 0.86 per cent.
"After major spikes in the previous two sessions, it was expected that market will see some corrections in trading," said a fund manager, on condition of anonymity.
He said investors were very cautious, reflecting the sweet-sour experiences of the recent past. "It shows volatility is far from over and remains a major concern".
Given the jumpy mood of the investors, many traders opted for profit booking rather than hanging on for more profit, which led to the fall, he added.
"Profit taking by investors was the main reason behind the decline and it was normal price correction," said Ahmad Rashid Lali, managing director of the Rashid Investment Services.
He said turnover, which marked 67 per cent growth on the previous session, was the only positive element in Tuesday's trading, indicating broader participation in the market.
Total turnover stood at Tk 9.63 billion, still three and a half times lower than the record set on December 5 last year. Out of 252 issues traded on the day, only 28 issues advanced and 224 declined.
National Bank led the turnover list with shares worth Tk 684.20 million changing hands. It was followed by Peoples Leasing, Beximco Limited, Bay Leasing, Union Capital, Southeast Bank, International Leasing, Grameenphone, Prime Finance and UCBL.
A total of 80.49 million shares changed hands against 52.95 million on Sunday, the previous session. The number of trade deals also increased to 171,487, which was 93,814 a session back.
Market capitalisation stood at Tk 2,785.24 billion (US$39.22 billion) - still $12 billion less than the historic high set on December 5, 2010. The market cap was Tk 2871.49 billion in the previous session.
Major sectors including banks, telecommunications, pharmaceuticals and fuel and power lost 4.29 per cent, 4.42 per cent, 3.46 per cent and 4.75 per cent respectively.
Other sectors such as ceramics, mutual funds, cement and tannery lost 8.21 per cent, 6.08 per cent, 3.98 per cent and 1.01 per cent.
The day's top losers were Southeast Bank, City General Insurance, RAK Ceramics, Keya Detergent, Meghna Petroleum, Malek Spinning, Prime Bank, National Bank, All Textile and Rahima Food.
Prime Finance and Investment Ltd was the highest gainer posting a rise of 8.37 per cent. It was followed by First Lease Finance and Investment Ltd, ACI Limited, Union Capital, Uttara Finance, IDLC Finance, UCBL, Eastern Lubricant United Leasing and Bay Leasing.
Read the original story on the Financial Express
SEC finds lacking in margin loan guideline
Mohammad Mufazzal
The securities regulator sent back the merchant banks' guideline on margin loans, terming it "incomplete and unclear" and demanding incorporation of individual client's limit in the modus operandi, an official said Tuesday.
The Securities and Exchange Commission made the observation when the merchant bankers association submitted its guideline on margin loans to the regulator at its office in Motijheel.
SEC officials discussed the draft with the association members and sought some changes in the planned guideline, pointing out some gaps and recommending a few suggestions so as to make it investor-friendly.
"We told them to make the guideline clear with specific examples for each of the points. We also ask them to incorporate two new points to make the guideline complete," an SEC official said.
"We have asked them to add individual client's lending limit and specify clearly as to how much shares a merchant bank can purchase for its own portfolio," he said.
The association has been advised to submit the guideline again after making the necessary changes and incorporating the points suggested by the regulator, he added.
"We just have done our job. It is now up to the merchant banks whether they are going to add these points or not," the official said, adding other points in the guideline were up to mark and protected investors' interest.
The association prepared the guideline after the regulator declared last month that it would not fix the margin loan limit for investors any longer and would now allow merchant banks to set the cap on their own.
The association which represents 37 merchant banks now operating in Dhaka and Chittagong has been tasked with drafting a guideline based on which they can set margin loan limits.
The regulator has said it would not intervene in margin loan-related issues any more once the guideline is finalised and approved by the SEC.
"After the guideline is approved, the merchant bankers can revise margin loan ratio once in a quarter or six months," the official said.
In the guideline that the association has prepared, the banks have suggested setting the ratio at 1:2 -- in line with the existing limit fixed by the regulator last month.
A merchant banker said they had a threadbare discussion on the guideline with the SEC officials.
"The regulator has made some specific suggestions on single client's limit and other issues. Personally, I don't think it would be wise on our part to set such limit for an individual investor," the banker said.
"There are big and small investors. We should not impose any barrier for our clients who are big and confident," he added.
Read the original story on the Financial Express
SEC recommends 6-member committee to execute money market decisions
Asif Showkat Kallol
The probe body on stock market scam has got a legal expert as its new member who will recommend legal actions against alleged unscrupulous stock traders involved in recent share market scam.
Banking division of Finance Ministry in a circular issued on Tuesday announced appointment of lawyer Nihad Kabir as the legal expert of the committee.
On January 25, the government formed a three-member committee headed by Krishi Bank Chairman Khondkar Ibrahim Khaled to probe into the massive ups and downs in the stock market in the last two years.
Besides, the Securities and Exchange Commission (SEC) on February 20 gave its consent to the banking division on formation of a new committee for making country's stock market stabilised for protecting the interests of the share investors.
The SEC suggested for a six member committee in this regard, sources said.
As per the SEC proposal, the members include – deputy secretary of finance division, executive directors of the SEC and the Bangladesh Bank, general manger of the Investment Corporation of Bangladesh, and a representative from the Insurance Development and Regulatory Authority (IDRA) and a member of the Association of Bankers.
The proposed six-member committee will executive the decisions of the money market regulators –Bangladesh Bank, SEC, IDRA, and Register of Joint Stock Companies, source said.
Commenting on co-opting a lawyer in the probe committee, Ibrahim Khaled, chairman of the committee, said a lawyer in the committee was needed since it already got economists and bankers.
After visiting the DSE on Tuesday, he said "The probe committee has now become a balanced one."
"We are doing our job in full swing and we've also made some progress," Ibrahim Khaled said.
"We'll be able to finish the investigation and submit the report within stipulated time," he added.
Earlier, the finance ministry in an observation said that share prices of many companies were going down, but the companies were not buying back their shares.
The proposed committee will execute the buy back method as directed by the finance ministry.
The proposed committee will also execute commercial bank's exposure limit in the country's two bourses.
As per the Bank Company Act 1991, the commercial banks require to expose only 10 per cent of their capital in the country's share market.
Read the original story on the Daily Sun
Shares fall as institutional investors remain sidelined
Share price, on the Dhaka Stock Exchange (DSE) fell yesterday as small investor went on a selling spree to cash in on the gains of last two sessions.
The market opened with an upbeat mood and the key DSE General Index (DGEN) jumped 128 points in the first six minutes. But subsequent steep fall ate up the early gains of the session.
The DGEN index declined 216 points, or 3.38 percent, to close at 6,173 points at the end of the session.
The market went up in pervious two sessions following a government announcement of extending fund support to stabilise the market.
But the market plunged yesterday as institutional investors were less active while the fund support was also inadequate, said Salahuddin Ahmed Khan, a former chief executive officer of the DSE. He suggested that the market get continuous fund support.
All the sectors reflected the market trend of the day but non-banking financial institutions which gained 0.86 per cent on the hope of dividend declaration.
Among the major sectors, bank, telecom, pharmaceuticals and fuel and power lost 4.29 per cent, 4.42 per cent, 3.46 per cent and 4.75 per cent respectively.
The broader DSE All Share Price Index (DSI) shed 176 points, or 3.32 per cent, to finish at 5,120 while the DSE-20 index of blue-chip shares dropped 227 points, or 5.25 per cent, to 4,094.
Day's turnover amounted, however increased by 66.7 per cent to Tk 9.7 billion compared to previous session's turnover.
A total of 252 issues traded on the day of which 224 declined and the rest 28 advanced.
National Bank topped the turnover leaders of the day with shares valued Tk 684.20 million changing hands.
The other turnover leaders were Peoples Leasing and Finance Services, Beximco, Bay Leasing, Union Capital, Southeast Bank, International Leasing and Finance Service, Grameenphone, Prime Finance and United Commercial Bank.
Prime Finance was the top gainer of the day followed by First Lease Finance and Investment Ltd, ACI, Union Capital, IDLC, United Commercial Bank, Eastern Lubricant, United Leasing and Bay Leasing.
The worst losers were Southeast Bank, City General Insurance, RAK Ceramics, Keya Detergent, Meghna Petroleum, Malek Spinning, Prime Bank, National Bank, All text and Rahima Foods.
Read the original story on the Daily Sun
Stock probe body expanded
The government has appointed another new member to the stock crash probe body to assist it in legal matters, said its head on Tuesday.
The number of the committee members now stood at four, headed by Khandker Ibrahim Khaled. "Nihat Kabir has been made the fourth member of the body," said Ibrahim Khaled, at a views-exchange meeting with stock market reporters.
He said, "Earlier I had requested the finance minister to induct a legal expert in the committee as there are many things in the investigation which need legal attention."
"A gazette has been issued in this regard," he added.
About the progress of investigation, Khaled said the committee will submit its report within the stipulated time frame as investigation is in full swing.
Earlier in the day, the probe body visited to the Dhaka Stock Exchange (DSE) and met the DSE directors and representatives of Merchant Bank Association, Bangladesh Association of Publicly Listed Companies and asset management organisations.
In response to a question on infiltration of black money in the stock market, the body chief said, "We'll try to get information in this regard from the NBR (National Board of Revenue)."
On January 25, the government formed a body to probe the recent stock market crash that triggered violent protests by angry investors and forced a freeze on trading.
The government has asked the committee to submit its investigative reports within two months.
Other two members on the committee are director general of Bangladesh Institute of Bank Management (BIBM) Dr. Toufic Ahmad Choudhury and ex-president of Institute of Chartered Accounts of Bangladesh (ICAB) Abdul Bari.
Read the original story on The Independent
Stocks down on profit booking
Stocks fell on profit booking on Tuesday after sharp rally in last two days.
Benchmark index DGEN dropped by 216 points or 3.38 per cent to 6173.38, after touching the day's high at 6518.41 in morning session and lowest at 6150.21 in the closing session. Market opened with a positive tone in early trading sessions, but profit-booking and selling pressure in mid-session pulled the marker down significantly, said dealers.
Some, however, said, investors are still in doubt about the market's stability as confidence is yet to be gained fully despite the government's efforts to prop up the market.
Turnover rose to Tk. 8.90 billion, up by 66.7 per cent over the previous session. Out of the 252 issues traded, 28 gained and 224 lost.
All sectors closed in the negative territory except non-banking financial institutions which gained 0.86 per cent on expectations of dividend declaration.
But the major sectors such as banking, telecommunications, pharmaceuticals and energy declined 4.29 per cent, 4.42 per cent, 3.46 per cent and 4.75 per cent respectively.
Southeast Bank topped the losers' list with a drop of 10.57 per cent as its corporate declarations failed to satisfy investors' appetite.
The bank announced a 20 per cent stock dividend and a 10 per cent cash dividend for the year 2010.
Other top losers include City General Insurance, RAK Ceramics, Keya Detergent, Meghna Petroleum, Malek Spinning, Prime Bank and NBL.
National Bank Ltd (NBL) was the top turnover leader with shares worth Tk. 684.19 million changing hands, followed by Peoples Leasing, Beximco Ltd, Bay Leasing, Union Capital, Southeast Bank, ILFSL, Grameenphone, Prime Bank and United Commercial Bank.
Prime Finance, First Lease International, ACI, Union Capital, Uttara Finance and IDLC were the prominent gainers.
Read the original story on The Independent
Stocks tank on profit-taking
Share prices declined yet again after a rise for a couple of days, as profit-taking sales by investors caused a downslide Tuesday.
The benchmark general index of Dhaka Stock Exchange (DGEN) slumped 216 points, or 3.4 percent, to 6,173.38 points, while the selective price index of Chittagong Stock Exchange dropped 347 points, or 2.9 percent, to close at 11,227.
The market got off to a flying start, gaining more than 130 points within the first five minutes of trading but went downward after that and continued until the close of trading on the DSE.
Share prices of the major sectors such as banks declined 4.3 percent, pharmaceuticals 3.4 percent, fuel and power 4.7 percent and the telecommunication 4.4 percent, while non-bank financial institutes gained 0.8 percent.
Finance Minister AMA Muhith asked the merchant banks on Friday not to go for 'forced sales' when the market is volatile. His declaration resulted in massive gains in share prices of most sectors.
Saiful Islam, managing director of BRAC EPL Stock Brokerage Ltd and vice chairman of BRAC EPL Investments Ltd, said: "It is very much expected and the price correction was unavoidable because most of the investors pocketed 20 percent profit today."
Investors' gained confidence after observing the current market situation because trade volume increased compared to the previous day of trading, he added.
The daily turnover stood at Tk 962 crore, up Tk 385 crore from the previous day. Islam said it was a positive sign that the daily turnover has increased.
Shakil Rizvi, president of DSE, said: "Investors went into profit-taking sales."
The government initiatives are restoring normalcy in the market, he added.
Rizvi also said the government and the merchant banks should decide upon guidelines on 'forced sales' for investors as soon as possible.
A total of 80.48 million shares were traded against 52.95 million in the previous trading session. The number of trade deals came down to 1,71,487, which was 93,814 in the previous session.
The total market capital increased to Tk 2,87,524 million against Tk 2,87,149 million of the previous session.
Of the total 252 issues traded on the DSE floor, 28 advanced and 224 declined. National Bank was the top turnover leader with 41.54 lakh shares worth Tk 68.41 crore.
The other turnover leaders were People's Leasing and Financial Services, Beximco, Bay Leasing and Investment, Union Capital, Southeast Bank, International Leasing and Financial Services, Grameenphone, Prime Finance and Investment and United Commercial Bank.
Read the original story on The Daily Star
Lack of regulation blamed for share market crash
Economists and left-leaning political activists in a view-exchange meeting on Tuesday blamed a lack of regulation and allowing the share market manipulators of 1996 to get off scot-free for the recent capital market debacle.
Investors took to streets and staged demonstrations because they lost money, not for any political reasons, they told the meeting on 'share market crash and the economics of looting' organised by Ganasanghati Andolan at the National Press Club.
A huge amount of money has been siphoned off the market, even smuggled out of the country, by the market manipulators, the speakers alleged and demanded meting out punishment to them and immediate compensation for retail investors.
When the indices of the country's stock exchanges had been soaring abnormally, the regulators and the government expressed satisfaction at the market trend; but it was the time when they should have taken measures to bring the overheating market under control, said Abu Ahmed, a Dhaka University economics professor and a leading equities market analyst.
Economist Anu Muhammad said the probe committee report on 1996 share market crash was yet to be made public, which paved the way for market manipulation again this year.
He said, 'The manipulation was done by a powerful syndicate of a few people belonging to the Awami League, BNP, and other political parties and the contradictory comments made by the prime minister and a ruling party lawmaker prove how powerful the syndicate is.'
If the regulators remain subservient to the very people who have to be kept on a tight rein, they practically act as the manipulators' helping hands, he said, adding that the manipulators had always remained sheltered under the umbrella of power and no one could touch them.
Anu Muhammad demanded immediate publication of the probe committee reports on both 1996 and 2011 share market crashes to ensure punishment of the manipulators.
Columnist Syed Abul Maqsud said accusing the BNP of share market manipulation by the prime minister and the finance minister was nothing but rubbing salt into the wound.
He heavily came down on the government for physically assaulting the investors traumatised by heavy losses, instead of standing by their side, and recalled that a number of investors had committed suicide after the 1996 capital market crash.
[On the other hand,] 'If a few of the millionaires and ruling party leaders would have lost every thing, the government would surely have come to their aid,' he said with heavy sarcasm.
Ganasanghati Andolan central leader Abul Hasan Rubel also spoke in the meeting chaired by chief coordinator of the organisation Zonayed Saki.
Read the original story on the daily New Age
Stocks make a U-turn
Dhaka stocks reversed into a decline on Tuesday after a two-day gaining streak as many investors went for selling shares, some to take profits and others to get out of the market.
The turnover of the Dhaka Stock Exchange on the day advanced by around Tk 385.20 crore due to the increased volume of trading after thin trading in the last two days.
The DSE general index, DGEN, lost 216.23 points, or 3.38 per cent, on the day with the turnover standing at Tk 962.95 core.
The index had gained around 810 points on the past two trading days after suffering a massive loss in the past few weeks. The turnovers on the past two days were Tk 577.71 crore and Tk 689.30 crore respectively.
Out of the 252 issues traded on Tuesday only 28 advanced and 224 declined.
Salahuddin Ahmed khan, a Dhaka University finance teacher, termed the declining trend on Tuesday's market as a 'downtrend syndrome'.
'The trend of the market on Tuesday is alarming as it indicates a downtrend syndrome,' Salahuddin told New Age.
'When the investors go for blanket sales of their portfolios for a marginal profit or bearing a minor loss, it may lead the market to another debacle, if continues,' he warned.
Salahuddin said, 'The general investors are yet to get back their confidence in the market.'
'The retail investors also need to shake off the tendency to earn profit from low-profile shares and go for shares with strong fundamentals to keep the market in the black,' he explained.
The general index of the Dhaka bourse that started the day on an upbeat mood had gained 128 points in the first 10 minutes but failed to keep up the momentum as the day advanced. After wavering for about one hour, the index started to fall from 12:00 noon due to a heavy selling pressure of the retail investors.
The pulse of the general investors was jumbled on the day as many investors went for selling off their portfolios to leave the market for good after recovering as much as they could of their losses, while some others bought shares on the hope that the market would rise further.
Harun Jamil, a retail investor who sold out his portfolio, said, 'I don't want to take any more risk as the market has been behaving so erratically in recent times.'
He said, 'In the past two weeks I had lost more than 60 per cent of my investment. As I recovered some of my losses in the last two days' sharp rise, I have decided to sell off all my shares.' 'I am still in loss but I prefer to leave with it,' he added.
The retail investors had gone on rampages on the streets of Motijheel as the DSE general index had lost 1,198 points over the previous two weeks. Waking up to the reality, the government took a number of measurers, including injecting fresh funds, to stabilise the market.
National Bank topped the turnover leaders with shares worth Tk 68.41 crore traded on Tuesday.
Read the original story on the daily New Age
Stocks probe panel expanded
The government has appointed a counsel to the stocks probe committee to assist it in legal matters, says the committee chief.
Ibrahim Khaled, at a views-exchange meeting with stock market reporters on Tuesday, said Nihat Kabir had been made the fourth member of the committee.
Khaled, also chairman of the Bangladesh Krishi Bank, said, 'I had requested the finance minister to include a counsel to the committee as there are many things in the investigation which need legal attention.'
Finance minister A M A Muhith approved the proposal to appoint Nihat, the committee chief said. 'A gazette has been issued in this regard.'
Expressing satisfaction over the progress in the investigation, he said, 'The probe report will be submitted to the finance minister in due time.'
'The minister will decide whether the report will be made public or not,' he added.
Read the original story on the daily New Age
Tuesday, February 8, 2011
Investors run amok
Ahmed Shawki and Md Atiqur Rahman
Agitated share market investors went on a rampage on Monday afternoon vandalising scores of vehicles and business establishments at Motijheel in the city as the general index of Dhaka Stock Exchange continued to plunge, shedding 324.51 points on the day.
The angry investors took to the streets of Motijheel, the commercial hub of the capital city, for the second day on Monday as the share prices continued to decline heavily as soon as the trading began.
Trading on the DSE started as scheduled despite the general strike called by the opposition Bangladesh Nationalist Party and in the first five minutes of trading the DSE general index took a plunge of about 240 points.
The index, however, levelled after an hour of trading and stood at about 6,725 points. But the share prices started to slide again as panic-stricken investors continued to sell off their stocks amid a liquidity crisis prevailing in the market.
The investors became furious and came out of brokerage houses after the index had lost 185 points after the midday.
They set fire to woods and papers piled up on the road stretching from the Bangladesh Bank building and Ittefaq crossing chanting demands for immediate resignation of prime minister Sheikh Hasina, finance minister AMA Muhith, Bangladesh Bank governor Atiur Rahman, and DSE president Shakil Rizvi for their failure to stabilise the market.
They blocked the road and staged demonstrations and took out processions in small groups. They also locked in sporadic clashes with the police.
Investors also took out several processions with their shirts taken off and waving their shoes in an expression of their frustration and anger towards the market regulators.
A group of agitating investors dislodged a roadside advertising board and wielding it chased media professionals covering the incident, shouting, 'We are losing every thing and you media people come here to telecast live shows without ticket.'
A small section of the investors, who were throwing brickbats at a Janata Bank branch and its adjacent business houses, locked horns with law-enforcers at round 2:30pm.
As the police went for action to disperse the rowdy investors, they took shelter in the nearby lanes and threw brickbats at the law-enforcers.
The general index of DSE lost 324.51 points, or 4.83 per cent, to close the day at 6,394.53 points as prices of 241 of the total 255 issues traded on the day declined heavily.
After the closing, the aggrieved investors ran amok, vandalising a number of cars and pelting brickbats at the offices of Bangladesh Bank, Citi Bank NA, IFIC Bank, NCC Bank, American Life Insurance Company, and a number of offices in front of the Jiban Bima Tower which houses the SEC office.
The Rapid Action Battalion then swooped on the demonstrators, chased and dispersed them.
The regulatory bodies including the government high-ups are 'worthless' and should step down immediately, shouted an investor named Shah Jalal from a rally in front of the DSE building.
Later, he told New Age, 'If the country's finance minister treated the capital market as a gambling house, it surely proves his ineligibility to have the portfolio.'
A section of investors also demanded that share trading should be suspended until the regulators could come up with appropriate measures to stabilise the market.
Mohiuddin, a small investor, said, 'What the regulators term market correction is an utter nonsense, rather it is an indicator of corruption.'
On Sunday, investors staged demonstration in front of the DSE building as the DSE general index lost 406 points, or 5.7 per cent, on the day. The market began to collapse last week for the second time in the past three weeks.
Experts attribute the recent volatility of the capital market to a lack of confidence of investors and a liquidity crisis prevailing in the market.
Salahuddin Ahmed Khan, a finance teacher at Dhaka University, told New Age, 'The investors have lost their faith in the market and are going for panic-driven sales.'
'It will take a long time for the market to bounce back in a natural process. It is suffering from liquidity crisis and the number of buyers is also declining due to the downtrend,' he said.
Salauhddin, a former chief executive officer of the DSE, said, 'The government can inject fresh funds to the market, which perhaps will stabilise the market.'
Anwar Securities CEO Azam Khan however said they were expecting the market to rebound after the merchant bankers and brokerage houses finished preparing the guideline on margin loan ratio.
'The merchant bankers and stockbrokers are supposed to formulate the guideline by February 10. Once the guideline is formulated, investors will get a clear idea about how much loans they would get and could go for buying shares,' he said.
Source: New Age
Suspension of 5 brokerages cancelled
The Securities and Exchange Commission on Monday decided to withdraw its order suspending the operations of five brokerage houses with effect from today.
The commission, in the wake of the current equities market debacle, convened an emergency meeting and decided to withdraw the suspension imposed on the houses for their alleged involvement in aggressive share sales on January 20, the day on which the capital market had collapsed.
The brokerages are Al-Arafah Islami Bank Ltd, Dhaka Bank Ltd, NCC Bank Ltd, PFI Securities Ltd, Alliance Securities and Management Ltd, and IIDFC Securities Ltd.
'The clients of the five brokerage houses will be able to trade shares from Tuesday,' said a commission official.
He, however, said the suspension of the chief executive officers or managing directors of the brokerage houses would remain in force until the end of the ongoing investigation.
The capital market regulators on January 25 suspended six brokerage houses –the five mentioned above and the NCC Bank – and their chief executives for 30 days after it had found their involvement in aggressive selling on January 20 when the general indices of Dhaka and Chittagong bourses had plunged by around 600 points in just five minutes of trading.
The commission also launched an investigation into the alleged aggressive selling by the brokerage firms and asked the account-holders with the houses to trade in shares by opening link accounts with other brokerages.
Five of the brokerage houses, except the NCC Bank, on January 23 submitted petitions to the High Court against the suspension order but a HC bench of Justice AHM Shamsuddin Chowdhury and Justice Sheikh Md Zakir Hossain summarily rejected them.
The regulators withdrew the suspension imposed on the NCC Bank on January 26 after the bank had apologised but the SEC continued with the probe into its alleged involvement in aggressive share selling on January 20.
The commission on January 30 allowed the accountholders with IIDFC to trade in shares through Bank Asia and MTB Securities Limited.
SEC officials said the decision to withdraw the suspension of five firms was taken considering the plight of general investors and to build confidence among them as the market had taken a deep plunge in the past three trading days.
Commission member Yeasin Ali told New Age that they had received reports against the brokerages houses from the six probe committees.
'We will now serve show-cause notices to the houses and ask them to reply them by 10 days. We will decide our next actions based on their replies,' he said.
Source: New Age
Key govt decisions to boost market not implemented
Md Atiqur Rahman
The government is yet to take any steps to implement the key decisions taken on January 23 to boost share market investors' confidence following the market crash in the preceding week.
Analysts said the lack of government initiative to implement the major decisions, including reinvestment by banks the profits they had made from the equities market, had depleted investors' confidence even further leading to the current bear run.
After the general indices of Dhaka and Chittagong bourses had lost 600 and 795 points respectively in just five minutes of trading on January 20, finance minister Abul Maal Abdul Muhith, following a series of meetings with stakeholders, took the decisions.
The few decisions implemented so far include resumption of trading on the bourses on January 25 after a two-day suspension, withdrawal of circuit breaker on general index, reducing the range of circuit breaker on share prices, and formation of a committee to probe into the market debacle.
But the major decisions like reinvestment of profits made by banks from the capital market, steps to amend the Banking Companies Act to allow more investment by banks in the capital market, the central bank adopting a flexible attitude towards financial institutions for investing in the share market, holding regular meetings between the Bangladesh Bank and Securities and Exchange Commission officials, suspension of initial public offerings of two companies under the book-building method, and including BB representative in the SEC advisory committee, are yet to be implemented.
Moreover, the SEC has already allowed Mobil Jamuna and MI Cement to hold draw for allocation of primary shares through the book-building method.
'The decisions taken by the finance minister seem to be mere claptraps as all the banks and financial institutions are still inactive in the market, which is facing a severe liquidity crisis,' said Khairul Anam, a general investor.
A stock analyst said, although the finance ministry decided that the BB would take a flexible stance on the issue of financial institutions investing in the capital market, the central bank in its monetary policy announced on January 30 discouraged banks' investment in the 'unproductive sector'.
'The main reason for the current capital market crash in which the DSE general index has lost 1,200 points in six days is liquidity crisis as the institutional investors like banks have remained inactive,' he said.
BB officials said, instead of listening to the central bank's comments, the banks were assessing their own risks in investing in the market.
Regarding the banks' reinvestment of profit in the capital market, a senior official said the central bank had already asked banks to separate their profits made from the capital market.
'We will know how much profits the banks had made from the capital market after they prepare their balance sheets in March-April,' he said, adding, 'Then we will know how much the banks should invest in the capital market. So, the banks might not be able to reinvest their profits made from the capital market before April.'
Source: New Age
Investors on rampage in city
Angered by continued fall in share prices for the third consecutive day, investors went on rampage in Motijheel, the business hub of the capital Monday. Trading of shares started at the Dhaka Stock Exchange as usual in the morning despite the countrywide shutdown called by the main opposition BNP but the index fell sharply from the very beginning.Around 1:00pm, the investors took position in front of the DSE building and started demonstrations. They also burnt papers on the middle of the road during the demonstration. As the transaction concluded at 3:00am with downfall of 314 points in the share price index, the investors became furious and damaged a number of business establishments on both sides of the road stretching from Shapla Chattar to Tikatuli crossing. The establishments which were damaged included IFIC Bank, NCC Bank, ICB Islami Bank, Janata Bank, Standard Chartered Bank and Banglalink office.
Later, the police went into action there and brought the situation under control at around 4:00pm.
No arrest was made in connection with the incident.
Source: The Independent
Stock investors go berserk again
A steep fall in share prices sent hundreds of investors out on the street in Motijheel to protest the plunge Monday, with many taking to vandalism for the second day. They vowed to continue their demonstration until the market bounces back.
The General Index (DGEN) of Dhaka Stock Exchange came down to 6,394 points, registering a 324 points or 4.8 per cent fall at the end of a four-hour trading session Monday.
With Monday's fall, the market remained in the red for a third trading session, marking a cumulative drop of 915 points.
As the incessant slump in stock prices creates frenzy, the government is blaming it on the main opposition.
Prime Minister Sheikh Hasina said the BNP has kicked up issues to call hartal by playing tricks in the share market and hoarding essential commodities resulting in a price spiral.
Although the freefall shaped up into a big headache for many, the government appears to be unfazed in the face of it, angry investors said.
Although the investors started gathering in front of the premier bourse from the opening bell of the trading session, the demonstration began at around 1:30pm after the DGEN plunged over 300 points.
The aggrieved investors set fire to paper and wood, burnt an effigy of the finance minister, and chanted slogans demanding resignations of the finance minister, central bank governor, market regulator's chairman and presidents of two bourses.
They also smashed up a bus and a pickup van in the area and broke windowpanes of some buildings adjacent to the DSE by throwing brickbats.
'My portfolio has been wiped out by 75 per cent. I have invested Tk 20 lakh, but now the value is Tk 5 lakh only,' said Mizanur Rahman, a shocked investor who was in tears. 'I am losing everything. I don't know what to do.'
Many others were expressing their feelings the same way, most of whose money was lost to the recent slump in share prices.
Stockbrokers said share prices kept declining without any let-up. 'Frightened investors started offloading the shares from the opening bell. Sliding confidence of investors prompted huge sell pressure and buyers were inactive in fear of further debacle,' a leading stockbroker said in its regular analysis.
Losers outnumbered gainers by 241 to 12, with two securities remaining unchanged on the DSE that traded more than 5.47 crore shares and mutual fund units at a value of Tk 609 crore.
Meanwhile, the Securities and Exchange Commission (SEC) has withdrawn a suspension order on trading of five stockbrokers.
The stockbrokers are: Al Arafah Islami Bank, Dhaka Bank Securities, NCC Bank Brokerage, PFI Securities, Alliance Securities and Management, and IIDFC.
Earlier, the SEC suspended the stockbrokers' trading activities for 30 days on charges of their involvement in the ongoing volatility in the secondary market.
However, the probe activities on these firms by the SEC will continue.
'Considering the current market situation and investors' interest, the commission has decided to withdraw the trading suspension on these stockbrokers,' said Saifur Rahman, a spokesman and executive director of the SEC.
Source: The Daily Star
Dhaka stocks dip as protest continues
Dhaka stocks saw yet another plunge, the latest in a series of recent collapses, as violent protests by angry retailers entered the second day in a row on Monday. The benchmark DSE General Index (DGEN) shed 4.8 per cent or 324.51 points to close at 6394.53, the lowest since January 20 this year when it fell 600 points in five minutes, forcing the regulator to suspend the trade.
The volume of trade also fell alarmingly as turnover clocked at Tk 6.0 billion, a decrease of 13 per cent over the previous session and the lowest in a year.
Hundreds of investors, who have been reeling under a confidence crisis, staged demonstrations sporadically outside the DSE building, chanting slogans against the regulators and authorities, damaging some brokerage firms and smashing some vehicles. Presence of investors on the trading floor was relatively thin due mainly to the countrywide daylong strike called by the main opposition party to protest mainly rising food prices and a recent stock market crash.
'Continued free fall and liquidity concerns have accelerated erosion of the investors' confidence,' said RY Shamsher, chief executive officer of the AB Investment Bank Limited.
At around noon, investors started to vent their anger by setting fires to papers, wood and other debris on the busy road in Motijheel, the commercial heart of the country.
They pelted brickbats at the entrance point of the central bank as they alleged that the central bank's raising cash reserve ratio has limited the bank's stock investments, leading to liquidity shortage in the market. They also damaged some offices, including Citi Bank NA, housed near the DSE.
The financial sectors were the worst losers. Banking issues, the market's bellweather, declined 5.15 per cent, non-banking financial institutions 5.32 per cent, life insurance 3.40 per cent and energy 5.32 per cent. Grameenphone, the most weighted shares in DSE, slipped 1.55 per cent even though it had declared 85 per cent cash dividend for the year ended 2010.
'Sliding confidence of investors because of the consecutive falls accelerated huge sell pressure and buyers were inactive in fear of further debacle,' said LankaBangla Securities in its market analysis. Investors' fury has been prevailing over the twin bourses since December last year as the DGEN lost 30 per cent since its peak of 8918.51 recorded on December 5, 2010.
On January 25, the government formed a committee to probe irregularities in the market. The Securities and Exchange Commission (SEC) took a number of steps to bring the confidence from brink but it was futile. Institutional investors, the key market players, along with retailers continued to remain inactive as they make no fresh investment in the market fearing overexposure in the market, said a merchant banker.
Source: The Independent
Monday, February 7, 2011
State companies face listing warning in Bangladesh
In a strong warning, Bangladesh finance minister AMA Muhith has said heads of state enterprises will be shown the door if they fail to offload shares on the stockmarket by the ‘next’
deadline.
The government plans to extend the deadline to the noncompliant state-owned enterprises (SoE) for the last time this week, after they defied orders from the highest level to offload their shares.
“I am unhappy with them, as it is not happening. I will call them to a meeting and tell them if ‘you cannot do it within certain days you have to resign’,” the minister said while speaking to a delegation of Dhaka Chamber of Commerce and Industry at his office.
“I am going to impose the condition that if they fail, their resignations will be effective then and there.”
In the last two years, the finance minister held several meetings with the SoEs to increase supply of quality shares to the bourses. But all of them failed to oblige.
His warning came after 34 state-run enterprises repeatedly failed to go public, although the prime minister endorsed the move to shore up bourses amid a crunch of quality shares.
Muhith now plans to sit with the ministries on February 10 in an effort to increase shares of the government-run companies in the stockmarket, which is going through a turbulent period.
The government asked nine SoEs—Rupali Bank, Bangladesh Shipping Corporation, Power Grid Company of Bangladesh, Dhaka Electric Supply Company, Titas Gas Transmission and Distribution, Meghna Petroleum, Jamuna Oil, National Tubes and Eastern Lubricants Blenders—to offload 1-17 percent additional shares in the market.
The minister also held a meeting in December last year and set January 15 as the deadline to release the shares, but only Rupali Bank showed some inclination to oblige.
Muhith also sent letters to the related ministries and divisions, asking them to execute the government decision and expressed dissatisfaction over the authorities’ procrastination.
“The deadline is set in consultation with the prime minister. No ministry has the jurisdiction to change it. The ministry of energy and mineral resources did not do the right thing,” the minister said in a letter sent to the energy and mineral resources ministry after it extended the deadline to offload shares.
Liquefied Petroleum Gas, Bakhrabad Gas Transmission and Distribution Company, Gas Transmission Company, Jalalabad Gas T&T Systems, Paschimanchal Gas Company, Rupantarito Prakritik Gas Company and Sylhet Gas Fields Company, Bangladesh Gas Fields Company—all under the Energy and Mineral Resources Division—missed three deadlines in as many years, with the latest on December 31 last year.
Dhaka Power Distribution Company received four time extensions to offload 15 percent additional shares but it failed. The latest deadline expired on December 31 last year.
Rural Power Company also failed three deadlines to go
public.
Progoti Industries and Chittagong Dry Dock, both under the industries ministry, breached three deadlines and now have to list on the stockmarket by June.
GEM Company and Bangladesh Blade Factory also could not offload shares despite missing three deadlines, with the latest in December last year.
The civil aviation and tourism ministry also failed to meet two deadlines for offloading shares of Bangladesh Services Ltd (Sheraton Hotel) and Hotel International Ltd (Sonargaon Hotel). Sonargaon Hotel has been allowed extension for the third time until June 2011 to go public.
The post and telecommunications ministry could not offload shares of mobile operator Teletalk and Bangladesh Telephone Company Ltd although they were given deadlines three times.
Under the same ministry, the deadline for offloading shares of Bangladesh Cable Industries and Telephone Shilpa Sangstha expired last year.
The health and family planning ministry could not honour the government order either, as the deadline for offloading 25 additional shares of Essential Drugs Company expired twice.
The shipping ministry also missed two deadlines for offloading 17.5 percent additional shares of Bangladesh Shipping Corporation.
Read the original story on The Daily Star
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