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
Subscribe to:
Posts (Atom)