Introduction of DSE:

The necessity of establishing a stock exchange in the then East Pakistan was first decided by the government when, early in 1952, it was learnt that the Calcutta Stock Exchange had prohibited the transactions in Pakistani shares and securities. The provincial industrial advisory council soon thereafter set up an organizing committee for the formation of a stock exchange in East Pakistan. A decisive step was taken the second meeting of the organizing committee held on the 13th march, 1953. In the cabinet room, eden building, under the chairmanship of Mr. A. Khaleeli, secretary government of East Bengal, commerce, labor and industries department at which various aspects of the issue were discussed in detail. Then the central government’s proposal regarding the Karachi Stock Exchange opening a branch at Dhaka did not find favour with the meeting who felt that East Pakistan should have an independent stock exchange. It was suggested that Dhaka Narayanganj Chamber of Commerce & Industry should approach its members for purchase of membership cards at RS.2000 each for the proposed stock exchange. The location of the exchange it was thought should be either Dhaka, Narayanganj or Chittagong. An organizing committee was appointed consisting of leading commercial and industrial personalities of the province with Mr. Mehdi Ispahani as the convener in order to organize the exchange.

The chamber informed its members and members of its affiliated associations of the proceedings of the above meeting, requesting them to intimate whether they were interested in joining the proposed stock exchange. This was followed by a meeting, at the chamber of about 100 persons interested in the formation of the exchange on 07.07.1953. The meeting invited 8 gentlemen to become promoters of the exchange with Mr. M Mehdi Ispahani as the convener and authorized them to draw up the memorandum and article of association of the exchange and proceed to obtain register under the company’s act.1913. The other 7 promoters of the exchange were Mr. J M Addision-Scott, Mr. Mhodammed Hanif, Mr. A C Jain, Mr. A K Khan, Mr. M Shabbir Ahmed and Mr. Sakhawat Hossin.

It was also decided that membership fee was to be RS.2000 and subscription rate at 15 per month. The exchange was to consist of not more than 150 members. A meeting of the promoters was held at the chamber on 03.09.1953 when it was decided to appoint Orr Dignam & Co., solicitors to draw up the memorandum and articles of association of the stock exchange based on the rules of stock exchange existing in other countries and taking into account local conditions.

The 8 promoters incorporated the formation as the East Pakistan Stock Exchange Association Ltd. on 28.04.1954. As public company, on 23.06.1962 the name was revised to East Pakistan Stock Exchange Ltd. Again on 14.05.1964 the name of East Pakistan Stock Exchange Limited was changed to "Dhaka Stock Exchange Ltd."

At the time of incorporation the authorized capital of the exchange was RS. 300000 divided into 150 shares. Of RS. 2000 each and by an extra ordinary general meeting adopted at the extra ordinary general meeting held on 22.02.1964 the authorized capital of the exchange was increased to TK. 500000 divided into 250 shares of TK. 2000 each. The paid up capital of the exchange now stoods at TK.460000 dividend into 230 shares of TK. 2000 each. However 35

shares out of 230 shares were issued at TK. 80,00,000 only per share of TK. 2000 with a premium of TK. 79,98,000.

Although incorporated in 1954, the formal trading was started in 1956 at Narayanganj after obtaining the certificates of commencement of business. But in 1958 it was shifted to Dhaka and started functioning at the Narayangonj Chamber Building in Motijheel C/A.

On 1.10.1957 the stock exchange purchase a land measuring 8.75 kattah at 9F Motijheel C/A from the government and shifted the stock exchange to its own location in 1959.

The major functions are:

Listing of Companies (As per Listing Regulations). Providing the screen based automated trading of listed Securities. Settlement of trading (As per Settlement of Transaction Regulations). Gifting of share / granting approval to the transaction/transfer of share outside the

trading system of the exchange (As per Listing Regulations 42). Market Administration & Control. Market Surveillance. Publication of Monthly Review. Monitoring the activities of listed companies (As per Listing Regulations). Investor’s grievance Cell (Disposal of complaint by laws 1997). Investors Protection Fund (As per investor protection fund Regulations 1999). Announcement of Price sensitive or other information about listed companies

through online.

BANGLADESH'S stock market has witnessed impressive growth since 2007. Listing of

Grameen Phone was a major recent event. It was expected that listing of GP would be a catalyst

for other companies to follow. That is yet to happen. It appears that progress of new listing rather

has slowed down. It has to get out of current stagnation and move towards further expansion. A

large number of new investors from across the country are entering the market. Institutional

investors are active in the market. Asset management companies are growing and their activities

are visible. A number of proposals for new mutual funds are awaiting approval. These

developments need to be seen positively. Policies regarding different methods of listing, IPO

pricing, approval of new mutual funds and other market related matters should be made keeping

long term market interest in view. It is desirable that short term policy interventions just to

address a temporary market crisis are avoided. In a small but rapidly developing stock market,

there will be problems like market manipulation, over pricing of stock, panic created by vested

interest, price distortion, regulatory shortcomings and so on. In any stock market, there will

bullish and bearish trends. Regulatory policies should be framed with long term vision. In recent

months, some policy decisions are being taken to address current problems at the cost of long

term market interest. These policy changes include fixation of minimum size of new public issue,

imposing restriction on private placements, disqualifying private sector companies under direct

listing and discouraging new mutual funds.

Many of the stocks are over priced and this is a serious risk factor for the inexperienced

investors. Entry of new companies in the market can help reduce gap between demand and

supply and help bring stability in the market. New companies need to be encouraged to come to

the bourse through market friendly policy. But recent policy interventions do not seem to be

moving towards that end. The state-owned companies are not coming forward for listing despite

repeated assurances given by the authorities. Immediate entry of at least two or three large

companies could be extremely helpful for a balanced growth of the market. Currently, Grameen

Phone alone accounts for a large portion of the market capitalisation. As a result, normal

movement of its price affects the index substantially and entire market is influenced by it. Entry

of a few more large companies could balance the market. In this backdrop the proposal on entry

of Janata Bank with its big capital was a welcome move. Perhaps, proposed premium was

excessive and the balance sheet called for a close examination. But these are problems that could

be settled. However, it now seems that the proposal has been shelved for the time being. This has

been done in spite of regulatory requirement of listing for all banks and financial institutions.

BTCL with its huge asset is another public sector company that could make immense

contribution to supply side of the market. But the way things are moving, it may take months or

even years for that to happen. Recently, we have been hearing about Bangladesh Biman's plan of

raising fund from capital market. This is a losing company with huge accumulated debt. It may

be difficult for the company to raise fund from the market unless it starts with a clean balance

sheet.

It has to be admitted that it is not the responsibility of the government to ensure listing of the

state-owned companies for expansion of the market. This alone can not be the solution either.

But the government and the SEC do have a responsibility to promote environment in which

private sector companies feel encouraged to raise fund from capital market. Private sector

companies are generally reluctant to be listed for variety of reasons. Therefore, it will be difficult

to bring them to the stock markets without liberal policy packages. Recent trend appears to be

just in the opposite direction. By imposing different conditions and limitations, the intending

companies are actually being discouraged.

On 11 March, 2010 SEC imposed certain conditions through a notification restricting further the

scope of public issue. Henceforth, minimum paid up capital (existing + proposed) required for

public issue will be Taka 400 million. It means that a smaller company that does not need that

much of capital will not be able to raise fund from the capital market. The notification also

provides that public offer at IPO up to paid up capital of Taka 750 million will be minimum 40%

of the said capital and no private placement will be allowed. For companies with paid up capital

between Taka 750 million and 1500 million, public offer at IPO has to be at least 25% of the said

capital or Taka 300 million whichever is higher. There will be no private placement. Where paid

up capital exceeds Taka 1500 million, IPO size has to be minimum 15% or Taka 400 million

whichever is higher. It appears from the notification that for this category of companies there is

no restriction on private placement. Determination of IPO size by the SEC seems to be

unwarranted. It should be for the concerned company to decide how much additional fund it

needs to raise for running the business. How can the SEC determine requirement of the

company? If a company does not need that much of fund, why should it be disqualified from

listing with a stock exchange? It seems to be an unnecessary policy intervention that will go

against smaller companies and discourage them to come to the capital market.

Private placements have been stopped in case of smaller companies. It is true that scope of

private placement has been misused in some cases recently and the problem called for

intervention. However, stopping private placement altogether does not seem to be the proper

response. Private placements have certain positive aspects also which should be taken into

account while formulating policy. Private placements help distributing ownership to a larger

segment of investors. It can generate confidence among investors if placements are made to

credible and reputed institutions. Proper placements can add to the strength of the company.

Therefore, policy intervention could be made to ensure placements on the basis of certain criteria

instead of doing away with it altogether. Besides, this measure may not be effective. If a

company wants to distribute shares, it can do so much before coming to SEC for listing.

Direct listing is another area of current interest. Private sector companies have been disqualified

under this scheme. This has resulted in an uneven playing field between public and private sector

companies which is difficult to justify in principle. This is a valid criticism that direct listing

does not help a company. Their beneficiaries are the share holders who offload the shares and

make extra profit from an overheated market. But private sector companies were coming to the

market under this provision and that was helping supply side in the market. In the past, public

sector companies derived the same benefit from an over priced market. Therefore allowing only

the government to take advantage of the over priced market can hardly be justified. It is true that

pricing mechanism under direct listing needs to be revisited. Current practice of price discovery

under book building is not justified under direct listing Institutional investors are taking

advantage of indicative price and getting allotment at the cut off price while the small investors

are obliged to buy the same normally at a much higher price after trading starts. If this policy is

to be continued, small investors should also get the shares at the cut off price through lottery as

in the case of IPO allotment under book building scheme. Under no circumstances, institutional

investors should be allowed to get allotment at a price lower than the price at which smaller

investors will be able to buy subsequently.

In the interest of improving supply of shares in the market, direct listing could also be allowed

for the private sector companies with some modifications. There should be an improved price

discovery mechanism so that general investors get the shares at an acceptable price and

manipulations are controlled. Provisions can be made to ensure investment of the generated fund

in the prescribed priority sectors. At present, new companies can not mobilize fund from capital

market. Only companies with proven track record are allowed to make public offer. There is only

one green field company now. However, direct listing method offers an opportunity where the

entrepreneurs may invest the sale proceeds of their shares of a company in another new

company. There can be many other ways of effective utilization of funds generated under direct

listing method. But disqualifying private sector companies altogether will only slow down the

process of new enlisting and deprive the market of new supply.

Growth of mutual fund in Bangladesh has been slow. Only recently there has been a rush for new

funds. Many banks and financial institutions are in the queue with proposals for their funds.

Mutual fund is often a misunderstood subject in Bangladesh. Many investors do not understand

the difference between mutual fund shares and other company shares. Mutual fund share is not

the share of a company. It is a fund under a trust. Investment in mutual fund is ideal for investors

who do not want to take risk because the fund is managed professionally and the collective

investment is diversified. The price of a closed-end fund share is normally determined by the

value of the investment in the fund. Therefore, the market price of a fund share is often close to

the per share NAV. However, in Bangladesh that may not always be the case. It is seen that

market price of a mutual fund share can at times be much higher than their NAV justify. Mutual

fund share price can also fluctuate heavily and be subject to wild speculation. As a result the safe

investment tool often becomes a risky area. In recent times, price of a share of a new fund has

been a few times higher on the very first day of trading defying the basic characteristic of mutual

fund. So the rush for getting private placement in the proposed mutual funds is understandable.

The concern of the regulator is also a normal response. However, negative attitude in respect of

mutual fund should be avoided. Compared to our neighboring countries, mutual fund size in

Bangladesh is very low. New mutual fund increases both demand and supply. In the interest of

professional investment and balanced market growth, new mutual funds must be encouraged. It

is true that massive influx of new funds at a time is not desirable in such a small market. SEC

policy of allowing these funds in phases seems to be rational. But impediments should not be

created in their normal growth and development of mutual fund should be encouraged. More

institutional and professional investment is likely to stabilise the market and help reduce rumour

based investment. However, private placement policy and allotment criteria may perhaps be

reviewed.

The expanding stock market needs a strong and efficient regulator to steer its growth. The

Securities and Exchange Commission will have to be more efficient and professional. It simply

can not run with the present manpower. It needs more professionals, more training at home and

abroad and more logistic support. But it is just not possible to attract the right kind of

professionals with the current pay structure. Housing and other facilities are shockingly absent.

The Commission deserves more attention of the government for its capacity building. The

authority of the Commission seems to have eroded in recent times. While the Commission has to

work within overall government policy, frequent intervention is not desirable. Public image of

the Commission must not be undermined.

Similarly, the stock exchanges will have to improve their professional management and practice

principles of corporate governance. It is desirable that Board of Directors or any of the exchange

members do not interfere with professional management of the exchange and leave day to day

management to the Chief Executive Officer. This may not always be the case now. Research

wing, surveillance department and many other areas will have to be more professional and

efficient. With increased daily turnover income of the exchanges must have gone up and it

should not be difficult to spend more for improved management.

Bangladesh's stock market is poised for rapid development. For this the SEC, DSE , CSE and all

market players should work together with the support of the government. Market confidence is

sure to erode if conflicting signals are received from different authorities. At the same time

investors will have to understand that in any stock market there are ups and downs and they can

not blame others whenever stock prices slide down. Fortunately, investors are getting matured

gradually and hopefully we may not have to see shouting and slogan in front of the exchanges

any longer. 

Bangladesh stock market -- possibilities and problems

1.1Present Crisis in Stock Market:

After having gained by about 80 percent during the year 2010, Dhaka Stock Exchange has shown

an unprecedented nose-dives.

According to DSE officials, more than 1,00,000 retail investors on an average are joining the

share market every month as the number of active B/O account holders doubled in a year to

reach 3.2 million in December 2010. Most of the new investors have little knowledge about

market environment and mechanism. So during this price fall they became panicky and started to

sell their shares even at a loss. So the downward trend got more speed and ultimately market fell

more steeply.

The analysts have opined that the immediate reason for this crash was the policy of the regulators

of the market who laid down a limit for investment by the banks and other financial institutions

in the stocks. This was done in order to avoid the market being overvalued. As the banks and

other big investor institutions withdrew the capital from the market, the panic ensued.

When it started its upward trend in 2007, the market was certainly undervalued, and there were

fundamental economic reasons for it to go up. At that time the average Price/Earning (P/E) ratio

was in single digit and the market capitalization was less than 10 per cent of gross domestic

product (GDP). The sustained upward surge, however, went beyond what could be justified by

economic fundamentals by early 2010.

Since mid-2010, as the index crossed the 5000 mark, the market has clearly been driven by

speculative forces. During the last two-month period leading up to the peak, the index increased

by more than 2000 points before crossing the 8900 level on December 5. To put it in proper

perspective, the index level was at about 1500 until this recent surge started in 2007. Daily

market turnover increased 30 fold about Tk. 1.0 billion to Tk. 33 billion over the three-year

period. Clearly, economic fundamentals cannot support this level of valuation gain and turnover,

and the market is bound to correct itself once it runs out of steam.

          Values                  Date         

  Total Number of Trades   389310 05-12-2010

  Total Trade Volume   165464146 30-12-2010

  Total Traded Value in Taka(mn)   32495.756 05-12-2010

  Total Market Capital in Taka(mn)   3680714.195 05-12-2010

  DSI Index 7383.93657 05-12-2010

  DSE General Index 8918.51346 05-12-2010

The recent drop in the stock market index needs to be evaluated in this context. Even after a

more than 3500 point decline, the index is still well above its mid-2010 levels. The corrections

and volatility in the price index that we have experienced in recent days is nothing uncommon,

and fully in line with what has been observed in many other important, and much larger stock

markets across the globe. For the market to start consolidating, it needs to shed itself of

speculative elements, and that can only happen once market valuations come back to their

fundamental levels.

There are several reasons which made the market plummet recently. More tightened policies

came from several sides like SEC, Bangladesh Bank and the government that pushed down

uptrend of market to downtrend. A large portion of the market investors are institutional

investors and most of them are commercial banks. Moreover commercial banks are now

investing more in share market to enhance their profit through capital and dividend gain. It is

alleged that many of commercial banks invested industrial loan in share market. We see that

Bangladesh Bank has declared several circulars regarding money market exposure. Sudden

increase of CRR from 5.5 % to 6%, SLR from 18.5% to 19 % and increase of paid up capital

created an extra pressure for commercial banks to raise their liquidity.

Global experience indicates that once stock markets get into a bubble phase, there is very little

that regulators or policy makers can do to stabilize it. This has been seen in major markets in the

US (NASDAQ in particular) and Japan, and in emerging markets like China and the Gulf Co-

operation Council (GCC) countries in recent years. A broad and deep market in the US did not

prevent the NASDAQ index from crossing the 5,000 level and crashing back to the 1,600 level in

a matter of weeks. The experience of Japan is even more pathetic, with the Nikkei crossing the

33,000 level in 1991, and following the crash, is currently flirting with the level of 10,000 after

almost 20 years. More recently we have seen the Shanghai stock index crossing the 7,000 level,

crashing down to well below 3000 after the correction. We saw an even worse development in

Bangladesh in 1996 when the index dropped from 3,600 to below 800.

The authorities should not panic due to the overdue correction observed in Bangladesh market in

recent months. Their main concern should continue to be ensuring macroeconomic stability and

sustaining real economic activity and employment generation. The stock market collapse would

not necessarily hurt Bangladesh’s growth and employment prospects if the process is well

managed. The recent tumble in the index should be seen as the inevitable outcome of irrational

exuberance on the part of market participants. What worries me is not the correction, but the

panic created by both in the streets and at the level of policy makers. What the retail investors are

doing in the street is certainly not going to change the course of the market. It only shows how

illiterate the Bangladeshi retail investors are as a class. Time and again, informed analysts and

policy makers have warned against the state of market overvaluation. We can have sympathy for

them, but there is very little the government can do to save those investors who are driven by

greed and speculation, and ignore professional advice. Certainly the market is not for these types

of investors, and the sooner they realize their mistakes and get out of the market, the better it will

be for the market itself and for them. When we see people in every office have the stock market

tickers on, and people leaving their productive jobs and becoming day-traders, we know there is

something fundamentally wrong with what was happening. The stock markets should be the

domain for long-term investors and market oriented professionals. Retail investors should invest

in the market through instruments like mutual funds which are managed by professionals.

1.2 The policy makers and regulators initiatives to overcome the crisis:

The policy makers and regulators would, however, need to prepare themselves for two

initiatives:

1. Assess the impact of a major stock market correction on the domestic economy and

determine what kind of policy response the government may have to undertake to

mitigate the dampening effect on the real economy through various transmission

channels; and

2. The SEC and other policymakers should prepare a comprehensive set of reform

measures which can be initiated once the market settles down at the proper level.

Nothing major should be done now, when the market is in a correction mode.

The market will find its floor when stock prices would become attractive for the institutional

investors, who are probably waiting in the side lines with lots of cash and other liquid assets for

future investment at attractive prices. The critical issue is should we call the prices attractive at

the average price/earnings (P/E) ratio of 23? This reported P/E ratio of 23 should also be taken

with a grain of salt since much of the record profit gains recorded by the financial institutions

would certainly disappear in 2011 and the adjusted or prospective P/E ratio will be much higher

than the reported level. It is normally believed that an average P/E ratio of 12-15 would be

attractive for long-term investors. Thus it would be irrational to expect institutional investors to

jump into the market and provide a floor for the index at the current level.

Policymakers should therefore not push or force the financial institutions to buy at these high

prices. Commercial banks and their subsidiaries have certainly made hefty profit gains in this

episode and these institutions should therefore be expected to provide some floor to the market

and also protect valuation of their own shares. It would be much more prudent however if

Bangladesh Bank first determines how much adversely these banks and other financial

institutions have been impacted through their un-cashed portion of stock holdings, the losses

incurred by their borrowers through margin and other form of borrowings, and indirect exposures

of their clients to the stock market. In some instances, the capital base of the banks may have

been significantly eroded and it would be the first order of priority for the Government and

Bangladesh Bank to recapitalize these financial institutions by preventing all financial

institutions from distributing their profits. The record profits earned by financial institutions

should first be used for loan loss provisions and to boost their capital base. Healthy financial

institutions are must for a healthy real economy and only healthy financial institutions will

provide the floor for the stock market when the valuations would become attractive.

It would be a serious mistake to force or pressure the financial institutions to enter the stock

market prematurely. Bad assets (in terms of valuation) to be accumulated by these institutions in

this process would only weaken their balance sheet and may lead to collapse of weak financial

institutions, thereby transmitting the impact of the stock market collapse to the real economy on

a bigger scale. As a matter of fact, Bangladesh Bank may have to be ready to inject liquidity to

the financial system in the event some banks are hit seriously by their direct and indirect

exposures to the stock market. The emergence of liquidity crisis in the financial system in recent

weeks may be an early manifestation of that problem.

1.3 Imposing New Circuit Breaker and Circuit Filter:

The Securities and Exchange Commission (SEC) imposed a circuit breaker on both bourses for

the first time in an effort to rein in volatile trading in the country’s two shares markets. The

circuit breaker for index and individual share price is fixed.

1.4 Bangladesh Fund:

The state-run investment organization and seven other state-owned enterprises have come

forward to give a massive liquidity support to the shriveling stock market by creating a Tk 5,000

crore fund. The eight SoEs are the sponsors of the fund styled “Bangladesh Fund”, which will be

an open-ended mutual fund, and the decision of floating the fund was finalized at a meeting in

Dhaka. Half of the fund will be utilized in buying shares from the secondary market, while the

rest will be kept for the money market. Apart from the ICB, the seven other SoEs are: Sonali

Bank, Janata Bank, Agrani Bank, Rupali Bank, Bangladesh Development Bank, Sadharan Bima

Corporation and Jibon Bima Corporation. ICB's contribution to the fund would be 10 percent of

its size when another 5 percent would be generated from issuing IPOs (initial public offerings),

keeping the rest 85 percent for other government banks and financial institutions. The Investment

Corporation of Bangladesh (ICB), the major sponsor of the BF, approved Tk 5.0 billion for the

Fund. Two state-owned commercial banks (SCBs), Sonali Bank Limited and Janata Bank

Limited, approved Tk 2.0 billion each for the proposed Tk 50 billion Bangladesh Fund (BF).

Asset management company RACE Asset Management Company has declared that they will

provide Tk. 20 crore in Bangladesh Fund.

1.5 Stopping the Book Building Method:

The government and the SEC has already taken the initiative to stop the book building method of

IPO because under this system the price of share will be higher before entering the market and

this also affect the market most.

1.6 Forming Investigation Committee:

Recent fall in the stock market leads to form an investigation committee to find out the reason

behind the fall of stock market recently and is there any manipulation in the market to lead this

massive fall in the market.

Suggestions for Capital Market

We have talked about promising prospects for the capital market in Bangladesh. Among factors

which should help in sustaining improved performance are as follows;

Considerable improvements in the regulatory framework.

Strengthened human resources in SEC.

Acquisition of greater skill by SEC staff in enforcing regulatory requirements through

on-the job experience as well as foreign training.

Somewhat greater consciousness of the investors, helped partly by past experience and

partly by investors' education programmes conducted by SEC.

Closer collaboration and dialogue between SEC and other regulators and market actors,

particularly the stock exchanges.

Strong policy framework and timely implementation of these policies are required to lure

the profit making local and multinational companies into the capital market. Moreover, it

is the overall socio-economic environment of the country that can encourage these

companies to come to the market.

Foreign portfolio investments is good for the capital market, But SEC needs to be

remains cautious given the very unpredictable nature of such funds.

Initiatives must be taken to introduce derivative market in our country.

Maintaining the confidence level of the general investors high by complying with strict

rules & regulations and amending the existing acts when necessary.

The prospectus or the offer document for issuance of securities must contains

comprehensive information disclosure, including those relating to the financial health of

the company so that investors are not misled in their investment decisions.

Capital market: structural problems & solution

The recent debacle on the stockmarket has outraged small investors and fuelled street agitation.Photo: STARMaroof Mohsin

The recent performance of the capital markets in Bangladesh, notably from December 2010 till February of 2011, has been very poor compared with its performance over the last five years. The index fell from a high of around 8,900 points to 5,200 points, a drop of almost 42 percent in just three months. Bangladesh capital markets have been in the top three best performing markets in the world over the last three years. However, its recent performance has cast a big doubt about its future performance. It is a case of “too much money chasing too few stocks”.

This correction in the market has been long overdue because there was too much money in the stockmarket in too few stocks. This inflationary pressure was finally controlled by the central bank by raising its cash reserve ratio (CRR) and statutory liquidity ratio (SLR) thus resulting in limiting the liquidity flow into the capital market. The interbank call money rate (DIBOR Dhaka Interbank Offer Rate) went up by 189 percent. One of the main reasons for this was that the domestic banks had too much of their money invested in the stockmarket, for quick and easy profit taking and as a result caused the stockmarket to rise even higher. So, to control the excess money in the capital market the central bank took these drastic measures, as it is within their right to do so, to control inflation.

The problems of the capital markets in Bangladesh are structural, and, actually quite far-reaching than what meets the eye. As we all know, the capital markets here, notably the Dhaka Stock Exchange (DSE), is way overvalued due to, firstly, the DSE index calculations being incorrect. Secondly, there are big syndicates acting together to artificially influence the prices resulting in huge profits for them at the expense of the average investors who put in their hard earned

lifetime savings. And last, but definitely not least, is the Securities and Exchange Commission (SEC) whose total policy and regulations favours' the syndicates which primarily consists of high net worth people and the stock exchange members resulting in an “artificial demand driven market”. Until and unless these fundamental issues are addressed the capital markets here will fail to see the light of the day.

So, if we look at the issues individually like the DSE Index, the syndicates, comprising of stock exchange members and the SEC we can find the common link, which is the stock exchanges and the SEC.

So the question arises, what do we do about them? The answer, my dear readers, rests with the question, which is to solve the problems at the two exchanges and the SEC and you will get a vibrant, dynamic and progressive capital market whereby all players involved starting from the stock exchange members and employees, firms wanting to raise capital. The SEC and most importantly the investors will enjoy the economic benefits because the markets will multiply enormously resulting in big profits for all trickling down to higher salaries, higher returns, dividends, more employment and capital market growth which in turn will attract more capital for our markets which in turn creates a virtuous cycle of wealth creation!

The solution is actually twofold. Firstly, there needs to be structural changes in the capital markets and secondly, there needs to be more supply of good companies getting listed.

Let's look at the structural changes first. What I mean by structural changes is, in essence, changes required at the DSE, CSE and the SEC. Let's look at the structural changes at the stock exchanges first which can be brought about through demutualisation. Demutualisation is the process of transformation from members associations into for-profit corporations. Stock exchanges across the globe have rethought their business strategy and model due to the simultaneous convergence of a number of powerful developments in order to find ways of how best to survive. And, in the process the exchanges have evolved towards new corporate, legal and business models to strengthen governance and face competition through the process of demutualisation. Currently, the DSE and the CSE operate under a mutualised structure. Under demutualisation the mutual ownership structure will change to a share ownership structure. The process entails first converting memberships into shares, which may or may not be followed by a public issue. Ownership and trading privileges are effectively separated. Stockbrokers are no longer owners but customers of the exchange. Directors are elected by shareholders and answerable to them.

The reasons for demutualisation are many but here are a few.

First and most importantly, in the case of Bangladesh, it is of rationalised governance. The corporate model of the exchange under demutualised structure will enable management to take actions that are in the best interests of customers and the exchange itself. With the separation of ownership and trading privileges, an exchange will achieve greater independence from its members with respect to its regulatory functions. There will be the requisite degree of transparency. Demutualised exchanges will be forced to account to their shareholders regarding the bottom line as well as corporate governance.

Secondly, there will be more investor participation. The new corporation will be more profit orientated due to shareholder accountability. Unlike a mutual structure where often only broker-dealers maybe members, a demutualised exchange affords both institutional and retail investors the opportunity to become shareholders. A demutualised exchange will have greater flexibility to accommodate the needs of institutional investors as customers, and potentially, as owners.

Thirdly, it is the resources for capital investment. A competitive stock exchange must be able to respond quickly to global competitive forces and technological advances. With the capital raised from initial public offerings or private investment and a heightened awareness of accountability to stakeholders, a stock exchange should have both the incentive and the resources to invest in the competitiveness of its information systems. So to be competitive, products and services must not only be timely and cost effective, but also reliable.

The second part of the structural changes needs to be at the SEC of Bangladesh. The fundamental issue here is: what is the regulator doing to help minimise risk for the investors? The absolute minimum the SEC can ensure is to have risk minimising tools. As a first step they can introduce scrip netting facility, like financial netting currently allowed, which could be in the form of settlement of trades being T+0: T is for time and currently trades have a settlement period of T+3 which means that investors buying any stock will have to wait three days before he can sell out his position. Next, they can introduce short selling whereby the investors has the facility to short sell if he thinks the price of stocks would fall and then buyback. By introducing these facilities it will allow investors to minimise risk as and increase liquidity as well. The SEC should also have a good surveillance system in place to ensure fair play. The introduction of equity derivatives should also most definitely be taken into serious consideration to minimise risk, as there are no instruments to do so.

Finally, the government of Bangladesh, who oversees the SEC, needs to ensure that the SEC as an organisation is run by more professional and credible people who has sound knowledge of the capital markets and its mechanisms. If that means hiring professionals from local or abroad and paying them attractive salaries then be it.

The second part of the solution is to have more companies being listed. This also applies to the government taking a dynamic approach in their privatisation manifesto and deregulating the economy so more of the state owned enterprises can be brought to the market which in turn would benefit the exchequer from more revenues. Investors would then have a wider selection of stocks to choose from thus making the former state-owned enterprises accountable to shareholder pressure and making them perform better.

Henceforth, we can see that, until and unless there are structural changes brought about in the capital market it will not grow. Artificially creating demand by pumping in more money in the capital market will only inflate the market temporarily before falling again. This will never solve the underlying fundamental problems. Whereas, when you open up the capital market by addressing its structural problems and bring in new products and regulations the market will grow, become more dynamic as capital flow will increase thereby increasing profitability for all. Good examples of demutualised and highly profitable exchanges can be seen all over the world like the LSE, NASDAQ, NYSE, EURONEXT to name just a few. These exchanges have evolved to such an extent that now the exchange business and the financial markets are in trillions of dollars! So Bangladesh needs to wake up, as the benefits are enormous!

Sharp fall in DSE; rising trend couldn’t be sustainable due to fund crisisLast updated on - July 31, 2011, by admin

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DHAKA :  The Dhaka Stock Exchange (DSE) Sunday experienced a sharp fall in the last day of

the month after it had gained nearly 600 points throughout the month.

Capital market analysts think fund crisis in the market and Bangladesh Bank’s (BB) anti-share

market monetary policy might be the reasons behind Sunday’s deep fall.

“The fund support to the market is standing on a weak-base which could not keep the rising trend

sustained. There is no new entry of fund in the market,” economists Prof Dr Abu Ahmed told

over telephone.

He said a nominal amount of black money could enter in the capital market whereas the newly

announced tight monetary policy of the central bank has contributed to the fall. “The central

bank has to play a big role for the share market.”

He also said the entry of money in the capital market is very difficult though many IPOs (Initial

Public Offerings) and shares are likely to come in the market.

Talking to this correspondent DSE senior vice president Ahasanul Islam said there is nothing

wrong in the fall since the index gained nearly 600 points this month.

He, however, said the fall of nearly 100 points in the last one hour of day’s trading might be

investigated and said that they would look into it whether anything unusual was there.

“The month began with about 6124 points that escalated up to 6710 point on July 24 to 25 that

shows nearly 600 points rise. Surely, the investors are taking out profit or they are selling shares

to buy public and new companies shares that are likely to enter into the market,” he said.

Giving a hopeful start, the DSE general index climbed steadily over the first half-hour of trading

showing over 30 points rise but at the end it closed lower.

The DSE benchmark general index (DGEN) skidded 128.18 points or 1.94 percent to close at

6459.62 at the end of four-hour session. The key index lost 39.94 points or 0.60 percent on

Thursday.

Meanwhile, the key index lost 14.28 points and 54.35 points on Wednesday and Tuesday

respectively though it gained 49.55 points on Sunday last week before entering into negative

territory on Monday.

Though the country’s premier bourse saw record turnover of the year on Sunday, it entered into

negative territory the following day and continued till the last trading day of the week.

The day’s turnover came down to Tk 13412.634 million from Thursday’s Tk 18047.388 million.

The turnover was Tk 17276.398 million on Wednesday.

Turnover had peaked at Tk 19.6 billion (19.58 billion) on Sunday, last week, the highest turnover

of the year so far.

Of the total 260 issues traded on the DSE today, only 37 advanced, 221 declined and 2 remained

unchanged.

All Share Price Index and DSE20 Index declined today. The All Share Price Index skidded

108.15 points or 1.97 percent to close at 5380.09 at the end while DSE20 Index plunged 50.68

points or 1.17 percent to close at 4264.63 points.

Most of the traded issues of all the major sectors including banks, mutual funds, cement,

insurance companies and financial institutions suffered loss today.

Among the 30 listed banks, only seven banks gained while the remaining banks except Al Arafah

Islami Bank Ltd suffered loss. Price of Al Arafah Islami Bank Ltd remained unchanged.

Financial institutions also followed bank category. Only three issues of listed 21 financial

institutions gained during the day. Of the 44 listed insurance companies, only 5 gained today.

National Polymer and Premier Bank Ltd were among the top 10 gainers while Maksons Spinning

Mills and IFIL Islamic Mutual Fund 1 were among the top 10 losers of the day.

What is Share Business, Reasons behind issuing share by a company, Risks involved in Share Business:

What is 'Share':In plain and simple, share is the owner ship of a company. Share represents a claim on the company’s assets and earnings. As you acquire more shares, your ownership stake in the company becomes greater. Whether you say share, equity or stock, it all means the same thing.

Why does a company issue share?

A company could keep the profits and earnings for the owners of the company. In order to extend market share or get bigger asset, at some point every company needs to raise money. To do so, company can either borrow it from somebody or raise it by selling part of the company, which is known as issuing share. The first sale of share by a company is called the Initial Public Offering (IPO).

Risk involvement in share:This is a very important factor you believe in risk when you want to invest in share market. There is no guarantee of what percentage of capital you will gain, where and when the share price stops in up-end or low end and how long it takes to get the profit. It is true, no company or institute can guarantee. However, you can measure the risks in various ways. That is why it is essential to do some “Home Work” on a company before you invest. The Home Work should be calculating earning per share (EPS), total debt, relative price strength, profit margins, volume, industry leader and so non. You can also reduce the risk by diversifying the portfolios and measuring the correlation between a share and market index. A less risk taker has options to invest in Bond 9fixed returns) or a company that provides dividends at the end of the year. However, investors need to measure”expected rate of returns” first and it should be high enough to compensate the investors for the perceived risk of the investments. Risk is contrary to the positive profit, but there is also bright side. Taking a greater risk demands a greater return on the investments. 

Bangladesh Firing After Market Crash

Well there are updates from Dhaka, Bangladesh that Bangladesh will fire the chiefs of the

country’s securities regulator after an independent probe blamed them for the recent stock

market crash, as per the finance minister’s statement.

The benchmark Dhaka Stock Exchange General (DGEN) index

touched a high of 8918.51 points on December 5 last year before plunging to around 5,200 points

in two months, gutting hundreds of thousands of small investors.

In the month of January the government ordered a probe into the crash after weeks of violent

protests by investors and amid media reports alleging some traders manipulated the market with

the help of regulators.

The government published the 284-page probe report Sunday, with finance minister A.M.A

Muhith vowing legal action against the manipulators.

He said the government would replace the Securities and Exchange Commission (SEC) chairman

and his two deputies this week.

“The government thinks that the SEC should be recast to restore confidence in the capital

market,” the finance minister told reporters on Saturday night.

The minister said the government would conduct further probe into the allegations that some

businessmen linked to the ruling Awami League party were involved in a stocks scam.

The Dhaka Stock Exchange of Bangladesh, which now trades at about 6,000 points, was one of

the world’s best performing markets between 2007 and 2010, taking Bangladesh up; but experts

warned of a bubble in which many small investors were caught up.

Written on March 16, 2011 at 3:49 am by shakilBUY-BACK POLICY SEC records suggestionsFiled under Bangladesh, News, Share Marketno commentsRef: The Securities and Exchange Commission (SEC) has discussed the issues relating to buy-back policy with the stake holders.

SEC spokesman Mohammad Saifur Rahman told bdnews24.com that the participants offered a number of proposals at the meeting on Tuesday.

Now, the proposals would be sent to the finance ministry for scrutiny, he informed.

Representatives of the Dhaka Stock Exchange, Chittagong Stock Exchange, Bangladesh Association of Publicly Listed Companies (BAPLC), merchant banks and other authorities concerned took part in the meeting.

According to Rahman, the proposals included approval of at least two-thirds of the people attending the AGM of a company eager to conduct buy-back, and completion of the buy-back process within one year of launching and submitting detailed information on the money and shares exchanged during the process.

The spokesman said it was suggested at the meeting that “any organisation will be eligible to cancel shares within seven days of issuing them, will have to be obey the provisions imposed by the government for two years and will not be able to issue any share during the period other than bonus shares”.

A proposal to impose some fine or sentence up to two years’ imprisonment for any irregularity in the process was also submitted at the meeting.

Speaking to reporters after the meeting, BAPLC president Salman F Rahman said, “The organisations that have extra reserves or extra premium on shares will buy back with that extra money.”

“We are thinking about launching a buy-back system similar to India, where companies can buy back 25 percent of their paid-up capitals,” he said.

“We’ve proposed to buy back 10 percent in Bangladesh,” he added.

If any company has extra capital, it can reduce its capital through buying back shares from the market to return the extra capital to investors.

Terming direct listing system ‘harmful’ for the market, Rahman said, “Direct listing system will have to be stopped.”

“We can list after modifying the book-building system, instead,” he suggested.

The BAPLC chief pointed out that prices of several companies’ shares slipped as they were listed directly. “Investors had to bear losses for this.”

On Mar 7, Finance minister A M A Muhith had stated that the government wanted to introduce buy-back policy in the share market.

Written on March 15, 2011 at 4:16 am by shakilStocks return from redFiled under Bangladesh, News, Share Marketno commentsRef: Share prices on the twin bourses gained yesterday as the state-run Investment Corporation of Bangladesh (ICB) reiterated that there are no problems to create and float the Tk 5,000 crore fund.

The benchmark general index of Dhaka Stock Exchange (DGEN) advanced by 287 points, or 4.5 percent, to close at 6,458 points.

The general index of DSE plunged by 459 points on Sunday following a rumour that the Bangladesh Fund plunged into uncertainty.

As per the government prescription, eight state enterprises announced the fund in a bid to support the secondary stockmarket now facing a severe liquidity crisis.

The selective price index of Chittagong Stock Exchange gained 518 points, or 4.6 percent, to close at 11,764 points.

Insiders said the current market situation helped the investors regain confidence as the trading volume gained gradually.

Institutional and retail investors went for big buying on the day, said market analysts said.

Market analysts observed that some low-profile companies turned into overpriced stocks while some big shares seem lucrative for investment.

Akter H Sannamat, a market analyst, said the market behaved rationally and price corrections are also needed for the market.

“I’d request the investors not to heed rumours while they sell or buy shares,” he said.

“Investors should check greedy impulses and make long-term investment in the market,” Sannamat said.

Most of the major sectors such as banks gained 3.95 percent, non-bank financial institutions 4.21 percent, fuel and power 3.88 percent, pharmaceuticals 2.76 percent and telecoms 7.03 percent.

The daily turnover on the DSE stood at Tk 1,059 crore yesterday, down by Tk 207.59 crore, compared to the previous day.

Of the total 254 issues traded on the DSE, 239 advanced, 12 declined and three remained unchanged.

Peoples Leasing and Financial Service topped the turnover leaders with 18.83 lakh shares worth Tk 52.24 crore traded on the day.

The other turnover leaders were Beximco, Bextex, Aftab Automobiles, United Airways, Maksons Spinning Mills, Union Capital, Uttara Bank and Shinepukur Ceramics.

The Dacca Dyeing and Manufacturing was the biggest gainer of the day, posting a 10 percent rise in its share price, while One Bank was the worst loser, slumping by 35.12 percent.

Written on February 28, 2011 at 11:56 am by cuMarket fall triggers demonstrations again: Investors to submit memo to PM TuesdayFiled under Bangladesh, News, Share Marketno commentsRef: Enraged investors again took to the street in the business-district Motijheel in a protest as both the bourses of the country saw significant fall in price indices on Monday for a fifth consecutive day of trading.

Form the demonstration the investors announced that they would submit a memorandum to the prime minister Tuesday demanding immediate restoration of the market stability.

The benchmark index of Dhaka Stock Exchange, DSE General Index (DGEN) Monday lost 260 points or 4.76 percent to stand at 5203.

Out of 252 issues traded on the day, 213 declined and 30 gained while nine remained unchanged. A total of 1,21,476 shares were traded throughout the day.

Chittagong stocks also marked a sharp fall Sunday, with the CSE Selective Categories Index climbing down to 9477 by shedding 453 points or 4.78 percent. Out of 181 issues traded on the day, 163 declined and 13 gained while six remained unchanged.

Following the fall of share prices at 12 noon, the agitating investors blockaded the road in front of DSE Bhaban, creating traffic congestion on two sides of the main road in the capital.

Some of agitating investors alleged that no decision of the government can create any impact on the stock market now.

Earlier on Sunday that the government directed four nationalised commercial banks (NCBs) and the Investment Corporation of Bangladesh (ICB) to purchase shares from the stock market immediately as an effort to check unrelenting fall in share prices

Written on February 28, 2011 at 3:15 am by emuStock-market opportunists must be punished: says MuhithFiled under Bangladesh, National, Share Marketno commentsRef: Categorically terming one-lakh new investors in the stock market opportunists, finance minister A M A Muhith Sunday warned of stern action against the speculators for the worst-ever share-market debacle.

“The speculators entered the share market in a bid to manipulate the market at a time when bourses were facing a downfall,“ the finance minister told parliament, visibly to the ire of his own party colleagues in the House.

“Who are they?” he raised such a strange question. “They entered the market to indulge in speculation. They must be punished.”

During his question-answer session in the parliament, he said there has not been enough scope to regulate companies on the stock market under the current law.

In this regard, the finance minister also informed the House that the government is preparing to enact new laws in the current parliament session to introduce “buy-back” system for the stock market.

“After enacting such law, the government would be able to make it compulsory for companies to buy their own shares,“ he opined.

Replying to another question he also said, “We have already undertaken various steps to stabilize the market. We are closely monitoring the market while we have formed a probe body to look into the market collapse. And they are still working on it.”

Written on February 20, 2011 at 3:23 pm by emu‘Share market getting stabilised’Filed under Bangladesh, Business, Share Marketno commentsRef: Dhaka Stock Exchange (DSE) president Shakil Rizvi has said government steps have helped small investors regain their confidence.

“Investors have regained their confidence in the market and if it continues things will return to normal soon,” he said at a press meet at the DSE on Sunday.

His remarks came following the uptrend of share prices in the first session of the week.

Rizvi, however, said the rise in the DSE index is normal as the government decided to buy shares from the market through state-owned enterprises.

The DSE boss described the ‘de-mutualisation’ of the stock exchange as a lengthy process but reaffirmed that they were working on it relentlessly ‘to finish the job in the shortest possible time’.

The key price index at the Dhaka Stock Exchange (DSE) closed at 6389.62 points on Sunday, which is 463.27 points or 7.81 per cent higher than the previous session.

Turnover at the country’s premier bourse stood at Tk 5.77 billion at the end of the session, which is 16 per cent lower than Tuesday’s turnover.

However, the market enjoyed overall price hike in every sector and only a few scrips slipped.

Out of the 259 traded issues, 251 gained and the remaining ones declined.

The day’s trading graph skyrocketed within the first five minutes and stayed above the 400 point mark throughout the session.

Written on February 14, 2011 at 7:40 am by kholachokhe

Investors demonstrate again, threaten tougher programmeFiled under Bangladesh, Business, Share Marketno commentsRef:Enraged investors again took to the street in the business-district Motijheel in a destructive protest Sunday as the benchmark index of Dhaka Stock Exchange, DSE General Index (DGEN), lost 474 points in a repeat of fall on the very first day of the week

.

During the demonstrations, the protestors also threatened to call hartal and other tougher programmes if steps were not taken to bring back normalcy on the stock market within a week.

The agitating investors blockaded the road in front of Modhumita cinema hall, creating traffic congestion on two sides of the main road in the capital.

They also threw brick chips at police and chanted slogans asking the government to take proper steps to check the market collapse.

The general index of Dhaka Stock Exchange dived 474.77 points or 7.27 percent down to stand at 6052.41 on the first trading day of the week.

Out of 255 issues traded on the day, 247 declined and five gained and three remained unchanged. A total of 1,51,499 shares were traded throughout the day.

Chittagong stocks also marked a major fall Sunday, with the CSE Selective Categories Index climbing down to 11264.8 by dropping 787.03 points, or 6.98 percent. Out of 191 issues traded on the day, 188 declined and three gained. No issue did remain unchanged.

The bourses, recently rattled by scam and crash, also saw major fall every trading day of the past week.

Written on November 17, 2011 at 7:12 am by uploaderDhaka stocks soar on PM’s pledgesFiled under Bangladesh, Business, Share Marketno commentsRef: A day after prime minister Sheikh Hasina assured investors that all that needed be done for the stock market would be done, the key index of the premier bourse began gaining heavily with prices of almost all shares rising.

dsegen index

The Dhaka Stock Exchange’s (DSE) general index shot up 150.94 points or 3.02 percent to 5138.5 points after the first six minutes of trading on Thursday.

The index, however, lost slightly afterwards to drop at 5120.25 points, posting a rise of 132.69 points or 2.66 percent at 11:30am.

it gained again to stand at 5182.15 points, rising 194.59 points or 3.90 percent at 12:02pm.

The turnover of Tk 1.76 billion was higher than the turnovers in the first hour of trading in the past few days. Of the 234 issues traded until then, 226 advanced, seven declined and one remained unchanged.

It was decided at a meeting, led by the prime minister on Wednesday night, that no question would be asked about ‘undisclosed income’ invested in the stock market, and a decision to announce short-, medium- and long-term plans in a day or two.

Since news of the meeting got out on Tuesday, stocks soared in Wednesday’s trading.

The DGEN spiked 338.23 points or 7.27 percent to 4987.56 points at the close of the second last day of the week’s trading.

The key index had plummeted 559 points from the start of the week’s trading. It lost 341 points on Sunday and Monday, and on Tuesday, it shed 228.20 points or 4.67 percent to 4649.32 points at close.

Written on September 22, 2011 at 5:51 am by cuSEC bans share sales by directorsFiled under Bangladesh, National, Share Marketno commentsRef: Dhaka, Sep 21 (bdnews24.com)—The capital market regulator has banned selling of shares by any sponsor or director of a firm, regardless of the percentage of their ownership.

The Securities and Exchange Commission (SEC) has also banned share sales by anyone owning five percent or more share of a company.

SEC executive director Saifur Rahman made the announcement at a press briefing on Wednesday. He said the ban would continue until further notice.

“SEC has taken the decision to protect the investors’ interests,” Saifur said.

He said the matter of selling shares by sponsor directors were discussed in meetings with stakeholders last week.

“The stakeholders blamed sponsor directors selling of shares for the fall in share prices,” he added.

Written on August 3, 2011 at 4:37 am by kholachokheNow SEC sings ‘don’t panic’ tuneFiled under Bangladesh, Business, Share Marketno commentsRef:The Securities and Exchange Commission (SEC) has advised investors not to panic because of continuous fall in share prices.

After full seven successive sessions of fall in the stock prices, the regulator on Tuesday said, “We are keeping an eye on the capital market.”

The SEC’s statement came at a press briefing hastily called after angry investors took to the streets to protest the general index’s fall of around 175 points at the Dhaka Stock Exchange (DSE).

The investors demanded resignation of the finance minister and the Bangladesh Bank governor for ‘their failure to control the market’. They also demanded prime minister’s interference to stabilise the market.

Many of the speakers at a rally held in front of the DSE by the Bangladesh Investors Union Council blamed the SEC’s announcement on filing of cases against those named in a probe report on the Dec-Jan stocks scam. They said because of the announcement, some key players were suddenly maintaining distance from the market, causing greater fall in the last three days.

“The investors don’t need to panic for this. We’re monitoring the market,” he said.

CASES AGAINST SCAM ACCUSED

“A committee was formed to protect the investors’ interest. Steps have been taken to file cases against some people following the panel’s proposal,” SEC executive director Saifur Rahman told the press briefing.

Asked when the cases would be filed, he said, “The process is underway. We are going to appoint lawyers and need to give final touches to the documents for the purpose.”

However, given the tone and tenor of Saifur Rahman, also the official spokesman of the SEC, it looks most unlikely that ‘it can happen anytime’ before next or the week after that.

The DSE general index shed 174.65 points or 2.74 percent to close at 6192.94 points.

Of the issues traded at DSE, only 12 gained 241 declined and three remained unchanged.

The turnover stood at Tk 8.42 billion.

After weeks of uptrend early last month, the prime bourse of the country again saw fall on Monday, the sixth consecutive day.

Market analysts, however, termed the downturn as ‘routine correction’.

Trading at DSE has been rescheduled for Ramadan and now continues from 10:30am to 1:30pm.

Written on April 19, 2011 at 3:39 am by emuTk 5000 cr Bangladesh Fund endorsed by SEC for feeding boursesFiled under Bangladesh, Businessno commentsRef: The Securities and Exchange Commission Monday endorsed Tk 5000-crore Bangladesh Fund meant for spurring the buying and selling of shares as part of bailout measures for stabilizing the share market, reeling from the worst-ever shocks.

“The fund was approved in a 3-hour-long meeting of the commission,” said SEC executive director Saiful Islam at a press briefing on the open-ended mutual fund to be funneled into the bourses somewhat dried up following burst of the bubbles.

Of the volume, Tk 1500 crore would be invested in the capital market through IPO (Initial Public Offering) in the first phase. With Tk 100 face value the market lot of the fund would be 1000 in unit, he added.

The market regulator`s spokesperson said the proposal of the state-run Investment Corporation of Bangladesh (ICB) would be under active consideration. “Besides, releasing 50% of the funds through Initial Public Offerings (IPO) is also under consideration.”

Funds for the Fund will be collected from sponsors or investors through sales agents to invest in stocks, bonds and short-term money-market instruments. It will also pay out dividends to the unit holders annually.

When asked, Saiful Islam however did not mention the exact time of releasing the fund.

Earlier on March 9, the board of the Investment Corporation of Bangladesh (ICB) approved proceedings on their part to generate the “Bangladesh Fund” aimed at boosting the investors’ confidence and giving a massive liquidity support to the stock market.

The state-run investment outfit and seven other state-owned financial institutions on March 6 announced the decision to create the syndicated fund.

The seven other SoEs are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Bangladesh Development Bank, Sadharan Bima Corporation and Jibon Bima Corporation.

Written on April 17, 2011 at 4:12 am by emu‘They are not guilty’Filed under Bangladesh, Business, Share Marketno commentsRef: The stocks probe committee chief has trashed a news report and the photographs of ‘suspects’, claimed to be based on the report submitted by his committee to the government.

“The newspaper did not publish reports in line with our report,” Khondker Ibrahim Khaled said.

In an interview with a private television channel, Khondker Ibrahim Khaled said those, whose pictures were published in Bengali daily Kaler Kantho (Apr 10, 2011), proclaiming them to be ‘top accused’ in the stocks market crash, were actually ‘not guilty’.

In the Bengali daily report, titled ‘The Key Players of Stocks Crash’, photographs of six people — Salman F Rahman, A H M Mostafa Kamal, Mosaddek Ali Falu, H B M Iqbal, Lutfar Rahman Badal and Noor Ali — were published.

Showing a copy of the issue, the interviewer asked, “Are they not guilty?”

“No, they are not guilty,” pat came the reply from Khaled.

Again, naming Falu and Iqbal, the interviewer sought to know from the probe panel chief whether the committee found any evidence of their involvement in the stocks scam, he said, “They are eminent figures of the society…they did not do it.”

He, however, threw a suggestion that ‘socially, economically and sometimes politically powerful, should not trade through omnibus accounts’, as it was ‘unethical’ according to his perception.

“They should trade through single BO (beneficiary owner) accounts,” he advised.

An omnibus account involves transactions of individual accounts which are combined in this type of account, allowing for easier management by the futures merchants or brokers.

Khaled also claimed that bdnews24.com had misquoted his remark that “only martial law can try stocks offenders”.

On Thursday, Khaled told Banglavision, “It’s not easy to fast-track such trials. There’re courts, and the court is always in favour of the accused. The court is never in favour of the accuser.”

“Only martial law can fast-track such trials,” he said in the interview. “You can take (them) into custody and hold summary trials. You cannot do that in a democracy…”

However, in another interview with the BBC Bengali service on the day next, Khaled claimed that he had not been properly quoted in the media.

“Let me say what I had said…I had said about our judicial system, not about our investigation,” he said.

He continued, “In a democratic country, one needs to go to court with strong evidence, or else it’s difficult to win (the case).

“In martial law, things are different. There is no need for evidence…a punishment could be meted out there. The question of investigation doesn’t come here.

“They [TV interview] are talking about martial law involving [our] investigation. It has no link to the martial law.”

A spokesman for bdnews24.com said the news editors just “reproduced” from the transcript of the TV report, which contained remarks of Khaled.

The spokesman also said the internet newspaper had recorded the report when Banglavision ran it once again in its evening bulletin.

Written on January 24, 2011 at 5:58 am by kholachokheMoney to be brought back: MuhithFiled under Awameleague, Bangladesh, Businessno commentsRef:The government will take necessary measures to bring part of the money back into the share market that the merchant banks withdrew as profit, the finance minister has said.

“Part of the money will be brought back and the market will reopen on Tuesday. I hope it’ll have a positive impact,” A M A Muhith said on Sunday evening after a high-level meeting on the market.

Economic advisor Mashiur Rahman, Bangladesh Bank governor Atiur Rahman, finance division secretary Mohammad Tareq, SEC chairman Ziaul Haque Khandkar and banking division secretary Mohammad Shafiqur Rahman Patwary were present at the meeting.

Muhith said the government would form a committee to investigate the recent market crash and decided to withdraw the index circuit-breaker and suspend the transaction of Mobil Jamuna and MI Cement.

“The investigation committee will be formed in 15 days. It will look into all the irregularities behind the unstable market,” he said.

Muhith also said the market needed to be restructured.

The minister said after the morning meeting that he had received medium- and short-term remedies.

“New rules and regulation should to be formulated and Companies Act needs to be amended and buyback policy will be made,” he said.

SEC will be strengthened and it would have regular interaction with Bangladesh Bank and RJSC, he added.

The government will take decision on private placement, book building and margin loan ratio after scrutinising the issues, Muhith said.

The capital market circuit breaker kicked in on the first day around 2:30pm on Wednesday, after one and a half hour of trading, as the prime bourse’s general index lost 225 points triggering the automatic trade shutoff.

CSE also followed suit as directed by the SEC.

On Thursday, trading at the country’s premier bourse began at 1pm instead of 11am, in line with a new decision, but the trading was halted within five minutes as the index quickly shed 587 points, beyond the level of circuit breaker.

Earlier in the morning, the minister held a meeting with stakeholders at the state guesthouse Padma, where they put forward a series of recommendations.

Muhith, making a U-turn from his Friday’s statement that he as well as the share market regulators might have committed mistakes in handling the market, on Sunday claimed he did not think the SEC had failed to control the market.

He also said the regulator would formulate a long-term directive on margin loan ratio.

“But to stabilise the market, we need to let it run by itself

“The market price earnings ratio is 23 and the index is at 6,300 level and I don’t think the market index is too high as far as PE ratio is concerned,” Muhith said.

The fundamentals of the market are good and they are also comparable to neighbouring countries, he added.

“It’s baseless that money is getting siphoned off from the capital market,” Muhith said, adding that “a small amount of money has been withdrawn from the market and actions will be taken against them”.

Muhith said he had talks with the merchant banks and institutional financers, who will remain active after the market opens on Tuesday.

From Dec 8 to Jan 20, the index fell 2,592 points. To address the abnormal fall, SEC introduced several changes in rules, increased margin loan ratio and put circuit breaker.

WHY SO LATE?

Former chief executive officer of Dhaka Stock Exchange (DSE) Dr Salahuddin Ahmed Khan in an immediate reaction on Sunday said the government’s steps over the stock market’s current situation came late.

“The government took all these decisions at a time when thousands of investors have lost their money,” Ahmed said.

“I don’t understand why they waited so long and allowed the market to swing off their hands in the first place.”

He also pointed at some hazy issues and said, “Some of the issues addressed [Sunday] such as bringing back merchant banks to the capital are not clear.”

“Earlier, the central bank was questioning the exposure limit of the banks in the capital market and now the government is urging them to invest more in shares, this is not clear at all,” Ahmed, a professor of finance at the University of Dhaka, said.

“However, if the financial institutions increase their participation in the market, it’ll certainly bring some positive changes,” a hopeful Ahmed observed.

Written on January 11, 2011 at 11:09 am by shakilDSE posts 15pc record riseFiled under Bangladesh, News, Share Marketno commentsRef: Dhaka stocks set a new record with a 1012-point rise, climbing over 15 percent, a day after a record fall of 660 points.

The DSE general index gained 1012.65 points or 15.58 percent to close at 7512.09 on Tuesday.

Of the 248 traded issues, 243 gained and the rest declined.

The total value of the traded shares was Tk 9.771 billion.

Beximco, National Bank, Grameenphone, Bextex and Titas Gas shares were on top of the day’s trading.

On Sunday, the DSE shed over 600 points in a single-day trading for the first time in its history.

It continued to bleed on Monday losing another 635 points in less than an hour, prompting the SEC to suspend trading — another first such move in Bangladesh’s history.

Outraged by the freefall, the general investors took to the street and engaged in clashes with law enforcers on Monday.

At one stage, prime minister Sheikh Hasina asked the finance minister, the Bangladesh Bank governor, and the chiefs of SEC, DSE and Chittagong Stock Exchange to take necessary steps to stabilise the market.

Meanwhile, the Securities and Exchange Commission passed an order to stop the trading of shares of several companies as their prices marked an abnormal hike.

BNP terms stock debacle a ‘plot’Filed under Awameleague, BNP by kholachokhe on January 11, 2011 at 3:18 amno comments

Ref:BNP has termed the record fall in the Dhaka Stock Exchange a ‘plot’ by the government and the market regulator.

“Like that of 1996 crash, it’s not a coincident, rather it was fabricated. Three million people lost their investmens within a moment,” party’s standing committee member Abdul Moyeen Khan told reporters on Monday.

“It can’t be accepted,” he said at the emergency press conference held at BNP’s Gulshan office, arranged after the DSE saw a record fall of index in a single day by 660 points.

The index lost over 233 points on Nov 6, 1996.

Trading at the two stock markets—Dhaka and Chittagong—were halted within an hour in the morning when the small investors took to the streets. Agitation also spread throughout the city and other parts of the country too.

DSE trading will resume at 11am on Tuesday.

“The government should have taken measures before such incident to take place in a bid to save the small investors,” the BNP leader said.

Quoting media reports, he alleged certain quarters and several private banks were behind the manipulation.

BNP senior joint secretary general Mirza Fakhrul Islam Alamgir, also a former state minister for agriculture, alleged that companies like Unipay-2 were behind the sudden fall. “They have made away with some Tk 4 billion luring people with high profits.”

“We demand transparent and thorough investigation into the matter.”

BNP chief Khaleda Zia, former education minister Osman Faruk, chief whip Zainul Abdin Farroque were among those present at the briefing.

Written on January 10, 2011 at 5:45 am by adminSEC takes 4 decisions to tackle crashFiled under Bangladesh, Business, Share Marketno commentsRef: Investors in stocks saw the biggest fall ever in single-day trading on the country’s bourse as share prices Sunday came down crashing to a new low.

DSE benchmark hits all-time low shedding 600 points

The general index of Dhaka Stock Exchange dived 600 points or 7.75 percent down to stand at 8295.41 on the first trading day of the week, after past week’s street rioting by losing investors.

Out of 244 issues traded on the day, 241 declined and only three gained. No issue did remain unchanged. A total of 210,905 shares were traded throughout the day.

In the previous sharp fall on December 12, the DES index dropped 285 points.

As the market remains volatile, additional police and members of Rapid Action Battalion were deployed in front of the DSE building to preempt any flare-up of trouble.

Chittagong stocks also marked a sharp fall Sunday, with the CSE Selective Categories Index climbing down to 13296 by dropping 840 points, or 6.32 percent. Out of 190 issues traded on the day, 188 declined and 2 gained.

Following the lowest-ever fall, capital markets in Rajshahi and Sylhet saw unrest. Investors in Sylhet staged demonstrations twice in the city, demanding resignation of the SEC president and release of the eight persons arrested earlier on January 6 during protest against the market slide.

In Rajshahi, investors took to the street after putting 10 brokerage houses under lock and key in the area between Saheb Bazar road and Kumarpara Alupatti after 12:30 pm following a rapid fall in price indices.

Against the backdrop of a topsy-turvy on the bourse, the Securities and Exchange Commission Sunday broached a four-point prescription for restoring the stock market into a stable state.

However, the share-market supervisors and operators woke up to a stark reality as the premier bourse took a knock down for an all-time low.

The remedies were worked out at a joint meeting of the SEC, Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE), said SEC executive director Farhat Ahmed.

The decisions are: introducing netting opportunity for Grameen Phone, unlimited margin loan facility for any individual, margin loan facility for investors after 15 days of opening of BO account, and fixing IPO release date of Salvo Chemical Industries on February 16 instead of January 30.

“Netting opportunity for Grameen would come into effect Monday while the decisions regarding the remaining three issues would be effective Sunday,” said an SEC source about the contingency measures.

Written on January 10, 2011 at 3:16 am by kholachokheBB wary of MLMFiled under Bangladesh, Business, Share Marketno commentsRef:Bangladesh Bank has warned the people against investing in multilevel marketing companies that offer abnormal profits in a short span of time.

In a statement issued on Sunday, the central bank said investors can get deceived by these companies that come up with schemes offering 10 percent or more profits a month upon investments in gold markets abroad or foreign exchanges.

The Anti-Money Laundering Act 2009 deems such investments as offences, the statement added.

The law prohibits transfer of funds to abroad without central bank approval.

According to the statement, the Anticorruption Commission has filed cases against several companies and the central bank has stopped their operations, “but they have continued their business under different names”.

According to the Register of Joint Stock Companies and Firms, there are 70 MLM companies currently operating in Bangladesh.

A policy to ensure transparency in MLM company operations was drafted by a commerce ministry committee on Sept 23 last year, according to media reports on Oct 10, 2010.

Written on December 19, 2010 at 11:02 am by shakilStocks crash:Margin loan ratio increased to 1: 1.5 to check crashFiled under Bangladesh, News, Share Marketno commentsRef: Investors Sunday staged a violent demonstration outside Dhaka Stock Exchange out of a rage as they saw stock prices crash in what finally stood as the biggest fall ever in single-day trading.

As the share prices on the country’s main bourse came down 551 points, the operators had to provide props through revising the margin-loan ratio to check a crash of the stock market.

Following a headlong fall of the indices in the afternoon, several hundred investors took to the street staging demonstrations in front of the DSE building in the capital’s busy business district of Motijheel. The angry protestors also clashed with police.

Severely injured during the rioting, Khorshed Alam Rinku, daily Kaler Kantho photo journalist, was admitted to Dhaka Medical College Hospital.

As per demand of the demonstrating investors, the market regulator–Securities and Exchange Commission (SEC)–withdrew its directive on members’ margin, which was supposed to be effective from January 2, 2011.

The situation returned to normal at around 2:00pm.

After trading, the regulator in a meeting of its market-monitoring committee increased the margin-loan ratio to 1:1.5 from 1:1 to check an unrelenting fall in the price indices of the market in the current month.

After the meeting, SEC executive director Anwarul Kabir Bhuiyan disclosed to journalists the decision on the corrective measure.

Stock-market analysts earlier had called the downturn a phenomenon of ‘market correction’—a turn back from a bubbling boom.

The general index of Dhaka Stock Exchange dived 551.76 points or 6.72 percent to stand at 7654.40.

Almost all sectors went down remarkably. Out of 243 issues traded on the day, 236 declined, 5 gained and two remained unchanged.

On the previous Sunday, the DSE index dropped 285 points, the second-biggest slide.

Chittagong stocks also marked the sharpest fall Sunday, with the CSE Selective Categories Index climbing down to 14034.2 shedding 858.22 points, or 6.11 percent. On the day, 179 declined and 4 gained only.

Written on December 14, 2010 at 2:50 am by shakilPlanned IPO to ‘bloat the bubble’Filed under Bangladesh, News, Share Marketone commentRef: An initial public offering (IPO), pending approval by the Securities and Exchange Commission, is speculated to be going to make matters worse for the red-hot, grossly overpriced market.

Brokerage firm Lanka Bangla Securities has recently applied to the market regulator to raise Tk 7.5 billion from the market by floating 30 million shares.

The offered price of each share is Tk 250, with a face value of Tk 10 and a premium of Tk 240.

If approved, it would be the first brokerage house in the country to be listed in the seemingly unsustainable capital market that is going through correction after a dramatic cataclysm last week.

According to the prospectus of Lanka Bangla Securities, the company intends to use 30 percent of the IPO proceed on margin loans.

Margin loans, disbursed by brokerage firms and merchant banks to share market investors against their holdings, are meant for trading purposes.

The company also stated that another 40 percent of the proceeding will be used for “strategic investment and proprietary investment”, which indicates capital market investment due to its nature of business.

“The net proceeds from the IPO shall be used in margin loan, investment in capital market, business expansion and others within 12 months of the receipt of the net IPO proceeds,” reads the prospectus obtained by bdnews24.com.

Analysts have been long saying that the capital market has been seeing an unreasonable hike for quite some time. An imminent crash has been warned of, one that could be devastating for short-term investors who could lose their savings.

Concerns blossomed into full-blown fear when, last Sunday, as much as 285 points were wiped off of the key index on Dhaka Stock Exchange in what was the biggest single-day fall.

It soared to the steepest ever level of 8,918 points on the opening session of the week before plummeting by 547 points, only 75 minutes into the start of trading just two days later.

Back in 1996, the first bubble peaked, pumped up by wild speculation and lax regulation, and helped set off five months of bear market until November before the stocks came crashing down in December that year.

The bursting of that bubble still shapes skepticism about stocks and provides a rough high-water mark for the market to reach before any recovery will be considered substantive.

Since last month, Dhaka Stock Exchange’s general index has gained over 1000 points. On Nov 10, the general index or the DGEN was at 7292 points and on Dec 13 it closed at 8329 points.

Cooling measures including the SEC decision to increase margin loan ratio to 1:1 from 1:0.5 after the massive plunge.

“The market has long been overpriced,” former SEC chairman AB Mirza Azizul Islam told bdnews24.com on Wednesday when the market lost more than 500 points in just an hour.

A general index between 6500 and 7000 points is reasonable for this market, according to Islam who was also the finance adviser to the last caretaker government.

Speaking to bdnews24.com on Thursday, Islam said that he had “reservations” allowing a brokerage firm to float shares.

“A brokerage firm’s intention will be always toward overpricing as it will yield more commission for them,” said Islam, who also served as the finance adviser of the immediate past caretaker government.

According to him, there will be a “conflict of interest” if the floating is allowed.

The market regulator is not sure either about whether to allow Lanka Bangla Securities to float shares at this moment in a market where many of the roughly 2.7 million investors are engaged in mindless gambling.“This is a brokerage firm, not an industry, bank or financial institution, the sole purpose of which is to put money on the market,” a senior SEC official told bdnews24.com preferring anonymity.

He agreed that if the portion of the raised capital comes into the market in the form of margin loans, it would certainly create a liquidity overflow, further overpricing the market.

According to him, the SEC will examine why such an entity should be allowed to raise money from the capital market.

The SEC official also pointed to the ‘irrationally high’ premium of Tk 240.

“The market may agree to pay the premium, but it’s very high and looks odd as well.”

Written on December 12, 2010 at 10:34 am by shakilDSE sees biggest-ever index fallFiled under Bangladesh, Business, Newsno commentsRef: As much as 285 points were wiped off of the key index on Dhaka Stock Exchange in the biggest fall in a single day on Sunday, in continuation of downward spiral from last week.

The benchmark DGEN at the premier bourse slipped 284.77 points or 3.31 percent and closed at 8295.41 on Sunday.

The previous highest fall in a single day was on Nov 6, 1996 when the index lost over 233 points.

Written on November 15, 2010 at 4:05 am by shakilStock index rises to all-time highFiled under Bangladesh, Business, Newsno commentsRef: Dhaka stocks continued their bull run for four straight sessions, unaffected by yesterday’s countrywide dawn-to-dusk hartal.

The benchmark index, DSE General Index (DGEN), rose 120 points, or 1.47 percent, its highest level.

Despite uncertainty over whether trading would take off, operations on the market began at 11am as usual, as several members logged onto the main server.

At 10:40 am, 164 members logged into the main trading server of the Dhaka Stock Exchange (DSE). It is mandatory that at least 71 or a third of the active members login to begin trading.

The market opened on a positive note and maintained the rising trend till the end.

The banking sector led yesterday’s rally, stockbrokers said. Among the 30 listed banks, 29 were in the green territory, with only one in the red. Investors are anticipating handsome dividend announcements and healthy corporate disclosures from the sector after December.

The trend has been backed by the third quarter bank earnings released recently, especially by the ones that booked huge profits from stock investment, said the chief executive of the brokerage wing of a private commercial bank. “The bank stocks are hovering, as investors are rushing to take a position in the sector, expecting good returns in the days ahead.”

Chittagong stocks also marked a gain yesterday. The CSE Selective Categories Index rose 204 points, or 1.36 percent, to stand at 15,188.

Written on October 20, 2010 at 2:39 pm by cuRumours fuel Dhaka stocks’ riseFiled under Bangladesh, Business, Dhakano commentsRef: Dhaka stocks edged up on Wednesday due to hectic buying of bank issues caused by rumours of quarterly profit declaration of the financial institutions.

Rumours fuel Dhaka stocks' rise

The banking sector which comprises nearly one-third of the capital market experienced phenomenal rise during the session. Over 86 percent of the banking issues gained and only 4 slipped.

The benchmark DGEN or general index rose sharply on the opening bell and remained stable during the session to close at 7522.38, reaching a new height by adding 45.55 points.

Turnover at the leading bourses slipped by Tk 310 million compared to the previous session and stood at Tk 19.08 billion.

Nearly 60 percent of all the issues traded on the day advanced and only 93 scrip lost price.

Nonbank financial sector saw huge rise during the day with over 80 percent issues from this category gaining in price.

However, major sectors like energy and telecom experienced decline during the session.

Titas Gas from the fuel and power sector led the turnover board with shares of Tk 874.97 million changing hands; the scrip went up by 0.27 percent and closed at Tk 1105.25.

Peoples Leasing & Financial Services Limited took lead in the nonbank financial sector with a turnover of Tk 621.66 million.

Market bigwig Beximco secured third position on the turnover board with shares worth Tk 520 million changing hands.

Social Islami Bank led the banking sector in top turnover chart; the issue saw trade of Tk 460.88 million and went up by a staggering 7 percent to closed at Tk 44.30.

Only telecom issue in the capital market, the Grameenphone, slipped by 1.54 percent and closed at Tk 247.90.

Written on July 26, 2010 at 8:57 am by kholachokheBiggest fall in a decade at DSEFiled under Bangladesh, Business, Newsno commentsRef:Dhaka stocks experienced the steepest fall in a single day on Sunday with over 200 points shaved off its index.

This is the biggest fall since the dark days of 1996 when the market saw a sudden rise and fall within a short spell.Key market index of Dhaka Stock Exchange, or the DGEN index, slipped by 204 points or 3.19 percent, to close at 6,200.21.

“The fall is due to the steps taken by the market regulator Securities and Exchange Commission”, said Shakil Rizvi, president of DSE.

“The step to put ceiling on margin loans, risk exposure assessment by the Bangladesh Bank and overall lack of confidence of the investors were behind this fall.”

Over the last seven weeks, market regulator SEC enacted at least four new directives to control the boom in the market.

In the latest of these directives, SEC, on Jul 21, set a ceiling for margin loan for the merchant banks and brokerage houses allowing them to lend Tk 10 crore and Tk 5 crore respectively to their clients.

On July 8, the regulator lowered the margin loan ratio to 1:1 from 1:1.5, allowing merchant banks and brokerage houses to lend up to equivalent amount of the value of shares that a trader has in his or her possession.

On June 15, the regulator prohibited margin loan facilities for what it termed “overvalued” shares — those with a price earning (PE) ratio above 40 points, to try and rationalise their prices.

A PE ratio is a company’s current share price compared to its earnings per share. If the PE ratio is higher, it is more likely the share price is overvalued.

Written on November 29, 2010 at 3:22 am by shakilCSE introducing next-generation web-based trading systemFiled under Bangladesh, Business, Nationalno commentsRef: Chittagong Stock Exchange is going to introduce next-generation web-based trading system for trade transactions in a much easier and quicker way, as hordes of investors are flocking to the country’s bourses.

The management of CSE, to this effect, signed an agreement with Millennium IT Software and Polaris Software Lab Ltd Sunday.

CSE President Fakhruddin Ali Ahmed, former president Mirza Salman Ispahani and Anush Amar Singhe of Millennium IT were present at the deal-signing ceremony.

Founded in 1996 in Sri Lanka, the Millennium IT is known as a subsidiary of London Stock Exchange. It is one of main software-solution providers on the international capital market. Millennium IT and India-based Polaris Software are jointly developing the next-generation trading system (NGTS) for the CSE.

The bourse President said, “CSE NGTS is the quickest order-processing system in the world which is used on Turkish and London stock exchanges.”

Using the system, the CSE can take 2,250 orders and 750 contracts per second against 50 orders and four contracts in the old system, he said, adding that the multi-channel order-submission system and real-time risk-management system would give maximum facilities to the clients for trading.

Written on December 14, 2010 at 4:00 am by shakilDestiny takes over Best AirFiled under Bangladesh, Business, Nationalno commentsRef: Destiny Group has bought off 80 percent stakes in the troubled Best Air for Tk 150 crore, said a top official of the local airline yesterday.

Best Aviation Ltd, the owning company of Best Air, and Destiny, a multilevel marketing company, signed a share-transfer deal on November 11, according to M Haider Uzzaman, who now acts as the managing director for the airline.

The deal was announced at the re-launch of the carrier last night.

“We were looking for partners to recover from the financial crunch that forced us to be grounded for months,” said Haider Uzzaman who had presided over Best Aviation as chairman before the takeover.

Mohammad Rafiqul Amin, chairman of Destiny Group, said his company wants to help Best Air come out of the crisis it has been facing for the last 21 months.

“Best Air has a ready infrastructure and permission to fly on 17 routes, and this has made us interested,” said Amin, also the new chairman of Best Aviation.

“Now, we have plans to purchase three aircraft, including ATR-500 with the capacity of 72 seats, and Airbus-320 with 150 seats,” he said, adding: “We hope these new initiatives will help the airline begin a new journey and regain its reputation.”

The company started passenger service in January 2008 under brand Best Air.

But within 14 months of its operation, the airline was grounded amid financial crisis resulting from a surge in oil prices on the global market.

Haider Uzzaman said: “The fuel price soared so high that we were unable to bear the losses coming from the increased fuel bills.”

“And eventually we were forced to suspend flights to avoid further losses,” he said, claiming that the airline incurred a loss of Tk 72 crore at the time it was grounded in March 2009.

Since then Haider Uzzaman had been looking for partners to inject fresh funds to salvage the airline that spread wings to catch a portion of Bangladesh’s air travel market of nearly 40 lakh passengers a year.

“We negotiated with many potential investors. Finally we formed ties with Destiny,” he said.

The airliner had earlier formed a partnership with Kuwait-based Aqeeq Aviation Holding in March 2007. But Haider Uzzaman claimed that Aqeeq did not invest in the airline in line with the contract.

He said Destiny would pay Tk 56 crore initially. “The rest will be paid within the next three months.”

The partnership will help Best Air use the huge marketing and distribution network of Destiny and resume flights soon.

“We are trying to give a new look to the airline by bringing in new aircraft and hiring skilled hands from home and abroad,” said Haider Uzzaman, adding that the airline wants to resume domestic flights from March 26.

He said the airline is now in the process of getting a clearance from Civil Aviation Authority of Bangladesh to resume flights.

“We want to resume our passenger services on Dhaka-Chittagong route from the Independence Day. We also plan to operate two flights a day on Dhaka-Cox’s Bazar route from the same day.”

It will resume flights to Sylhet, Barisal, Jessore and Syedpur on March 26, Haider Uzzaman said.

The airline plans to open flights to regional destinations such as Bangkok, Kuala Lumpur, Colombo, Dubai, Singapore and Male from September next year.

Written on October 19, 2010 at 4:02 am by kholachokheWarid getting branded “Airtel” soonFiled under Business, Mobile, Newsno commentsRef:Warid Telecom, a wholly owned subsidiary of the Dhabi Group, is going to get a fresh name within few weeks as Bharti Airtel has already acquired 70 per cent stake worth Rs 1,363 crore in the Middle-Eastern company’s Bangladesh venture in January 2010.

Warid Telecom, which offers mobile telecom services with a user base of over 3.5 million in Bangladesh, will be branded anew as Airtel, opening up a new era with the introduction of such a new venture with an Indian telecom giant, Bharti Airtel.

As soon as Airtel bought 70 percent share of Warid in January, this year, the procedure of transformation of Warid into Airtel started. Besides, Airtel has already completed all the related logistic preparations to increase the number of the subscribers with its attractive business applications, entertainment services and to further spread the wings into the rural areas.

Airtel bought over the Bangladesh venture of the Abu Dhabi-based telecom multinational at a time when Indian conglomerates are out on the global plane acquiring some big businesses in different countries, including next-door-neighbour Bangladesh.

“Indian mobile operator giant Bharti Airtel will formally start its commercial operations very soon in Bangladesh with world-class technology and networking services,’’ said Airtel president Atul Bindal while addressing a press conference at a city hotel after his arrival Thursday.

The Airtel president is here to give the finishing touches to the process of re-baptizing Warid Telecom under the brand name Airtel.

“We are all set to step into Bangladesh with a joint-venture mission,’’ said Atul Bindal, who, however, declined to declare any specific date for the launch of the operations.

The Airtel president reminded that his company is working for introducing third-generation network for the real mobile subscribers as part of its commitment to the valued clients.

”Some agreements with Ericsson and Huawei were already signed with a view to spreading the company’s wings with the latest blade networking and uninterrupted Internet connection. It also includes network design, planning, and implementation and project management,’’ said Max Yang, Chief Executive Officer of Huawei.

While addressing the press conference, Chris Tobit, Managing Director and CEO of Warid Bangladesh, said that Ericsson and Huawei worked together for eight months in order to improve voice and non-voice network across the country. Intrap-agreements were also sealed with four other operators, he added.

Users of 19 countries of Asia and Africa use Airtel and users of India and Sri Lanka are using this mobile network successfully.

Written on December 2, 2010 at 3:51 am by emuWarid now Airtel BangladeshFiled under Bangladesh, Businessno commentsRef: Warid Telecom, the majority shares of which were bought by Bharti Airtel earlier this year, has been renamed as Airtel Bangladesh Ltd.The company made the announcement at its headquarters in the city on Wednesday.“However, the company now wants to use the name only for its internal purposes,” its chief executive Chris Tobit told a function organised on the occasion.

On Jan 12 this year, Bharti Airtel announced to buy a 70 percent stake of Warid Telecom in a deal worth about $1 billion.

The deal paved the way for Bharti to go for its second venture outside India. In 2009, the company had launched its mobile services in Sri Lanka on a state-of-the-art 3.5 G network.

Earlier, Warid Telecom was a fully-owned subsidiary of Dhabi Group, offering mobile services across 64 districts of Bangladesh with a total customer base of over 2.9 million.

Meanwhile, Bharti Airtel has gone on re-branding campaign for Airtel.

Airtel chairman and Managing director Sunil Bharti Mittal recently unveiled its new logo, designed by UK-based Brand Union.

Written on November 24, 2011 at 5:14 am by uploader

SEC takes major steps to stabilise marketFiled under Bangladesh, Business, Share Market no comments

Ref: 

The SEC has spelt out its much anticipated stock market incentives package, with provisions for increased commercial bank, merchant bank and foreign investments.

Market experts and stakeholders think that the measures could well lift the market up if properly implemented.

After a week of meetings with agencies and stakeholders following the prime minister’s instructions, SEC chairman M Khairul Hossain announced the package on Wednesday afternoon.

In a major move to inject more cash into the market, the central bank will extend the deadline for commercial banks to adjust their single-party exposure relating to share market to Dec 31, 2013 by one year, the SEC chief said.

The Bangladesh Bank will also redefine “exposure” when the commercial banks will invest through subsidiaries such as merchant banking.

To entice funds from abroad, the National Board of Revenue will withdraw the 10 percent capital gains tax on investment in capital market by foreign institutions or non-resident Bangladeshis, the SEC chairman said.

THE COMPLETE PACKAGE

The moves, called a ‘complete package’, a term frequently used by SEC member Helaluddin Nizami in the past few days.

The package includes four parts: short-term steps, mid-term steps and long-term steps and a special scheme to guard the interests of the investors, who have been the real victims of continuous fall in share prices.

According to the short-term steps, which are to be executed immediately, merchant banks can collect up to 49 percent capital from sources other than their parent banks. Previously, they would collect 99-100 percent capital from their parents.

The short-term steps also include Tuesday’s announcement that made it mandatory for sponsor directors of listed companies to have 30 percent stake of their firms, or buy shares to reach the level within six months. The step aims at raising capitals of merchant banks to resolve liquidity crisis.

The mid-term steps, to be executed within three months, include a provision for the brokerage houses to appoint professional, skilled and experienced investment managers. SEC will also launch Equity Research Publications to ensure investors, academics and policymakers get access to information.

A guideline will also be enacted to ensure transparency and accountability of listed companies.

The long-term steps, to be executed within four to six months, include strengthening laws to stop insider trading, modernising the Small Investor Protection Act and demutualisation of stock exchanges.

COMPENSATIONS

Hossain named a six-strong panel led by the ICB chief executive Mohammad Fayekuzzaman to recommend ways to compensate the victims of unexplained fall in share prices. The committee would get two months to file its report.

Central Depository of Bangladesh (CDBL) CEO M H Samad, Dhaka Stock Exchange president Shakil Rizvi, Chittagong Stock Exchange chairman Fakharuddin Ali Ahmed and two representatives of the Banks and Financial Institutions Division and the SEC are the other members of the panel, Khairul said.

He said a ‘special scheme’ was taken to guard the interest of those who lost money for continuous fall in share prices.

Small investors to get stimulus

Stock regulator unveils 21 steps to jack up market; analysts term it temporary reliefSarwar A Chowdhury

* 6-member panel to compensate investors who lost money* Banks' loans to subsidiaries won't be counted as stock exposure* Exposure limit won't cover long-term equity investment of banks* 10% capital gain tax for foreign investors and NRBs goes* SEC allows investment advisory service* Banks get more time to adjust additional exposure to stocks

The Securities and Exchange Commission (SEC) yesterday unveiled a 21-point market stabilisation package, including a special scheme on compensating the retail investors who lost money to downswings.

The stockmarket regulator disclosed the much-talked-about package with short-, mid- and long-term steps a week after Prime Minister Sheikh Hasina had a talk with market policymakers and stakeholders to rejuvenate the troubled market.

The package will give only a temporary relief to the investors, said former finance adviser Mirza Azizul Islam.

“For long-term stability, the commission should increase supply of shares into the market, and after passing the immediate crisis it should focus on management instead of market indices,” said Islam, also a former chairman of the SEC.

Salahuddin Ahmed Khan, who teaches finance at Dhaka University, said the plan is an initiative to change the structural format of the market.

Khan, also a former chief executive officer of Dhaka Stock Exchange, thinks there are no short-term steps to implement and all measures are long-term plans.

“The market will be stabilised in the long-run if the SEC can implement all the steps it came up with,” he said.

In a press briefing, SEC Chairman Prof M Khairul Hossain said a six-member committee was formed to find ways to compensate the retail investors who traded with small investment or on credit.

The managing director of the state-run Investment Corporation of Bangladesh leads the committee, which has been asked to submit a report to the finance ministry in two months, Hossain added.

"The short-term measures can be implemented right now while the mid-term steps within three months and the long-term steps by six months,” he said.

The first two steps under the short-term measures are that: banks' investment in their subsidiary would not be included as their exposure to capital market, and that long-term equity investment of a bank will not be counted in its exposure limit.

Besides, in case of provisioning stockmarket investment by banks, gains and losses would be considered instead of net loss only.

These steps will increase the capacity of banks, which are considered key institutional investors for injecting more funds into the market and have been facing a severe liquidity crisis for the last few months.

As per existing laws, the banks are allowed to invest up to 10 per cent of their liabilities in the sharemarket through equity investment or providing loan to their subsidiaries while they provision considering the net loss only.

The government as a short-term measure withdrew the 10 per cent capital gain tax on foreign institutional investors and Bangladeshi expatriates. "It would encourage more foreign investments in our stockmarket," said the SEC chairman.

The deadline for lowering the exposures of the banks that have gone exposure beyond permission limit has been extended to December 2013. The banks with merchant banking operations and brokerage activities in subsidiary form were scheduled to bring down their overexposure to the authorised limit by December 31 next year.

The merchant banks and their stockmarket related subsidiaries, non-banking financial institutions and insurance companies can raise funds equivalent to 49 per cent of their paid-up capital from anywhere -- an initiative that will reduce the merchant bank and their subsidiaries' dependency for equity on their parent companies.

As per the securities rules, parent companies of merchant banks and subsidiaries provide 99 to 100 per cent equity.

"We have already made it compulsory for sponsors, directors and promoters of a company listed with any stock exchange to jointly hold at least 30 per cent stake in the firm for all time," the SEC chairman said, adding that many sponsors and directors of the listed firms have less than 30 per cent stakes.

Other short-term measures include a consensus of commercial banks in investing more in the stockmarket and assurance of insurance companies to inject more money to the market.

Under the mid-term measures, the SEC would allow investment advisory service to develop a rumour-free market. "It will compel the institutions and brokerage houses to appoint professional, efficient and experienced investment manager, said Prof Khairul Hossain.

"The commission will also allow equity research publications to ensure access to information by investors, academicians and policymakers," he said.

The mid-term measures also include formulation of guidelines for corporate governance to ensure transparency and accountability of the listed firms, and finding out ways to increase the capital of merchant banks and subsidiaries.

Under the long-term initiatives, the government will formulate financial reporting act to make qualitative improvement in accounting and auditing disclosures by the listed companies.

"The current SEC insider trading act is very weak. We will make the act more comprehensive and stern through modification. It will restore investors' confidence," said Hossain.

The small investor protection act is failing to protect the interest of the small investors. "The rules will be updated in line with the laws in developed countries," he said.

The long-term measures include demutualization of stock exchanges by next year, adopting necessary steps to make the mutual fund sector stronger and more attractive, and intensifying the supervision activities of the capital market by establishing enhanced surveillance system so that the investors are not cheated.

Stocks plunged 4 per cent to 5,372 points at yesterday's 3:00pm closing. The SEC unveiled the market stabilisation package an hour later.

SEC package only a brief relief: analysts

M Khairul HossainGazi Towhid Ahmed

The stockmarket stabilisation package announced by the Securities and Exchange Commission (SEC) will only give a temporary relief to the retail investors, analysts said yesterday.

The reaction came after M Khairul Hossain, chairman of SEC, unveiled a 21-point package to stabilise the troubled stockmarket.

AB Mirza Azizul Islam, former finance adviser to a caretaker government, said the SEC steps will only raise demand in the market.

Islam, also a former chairman of the SEC, stressed the need to increase supply of shares to permanently stabilise the market.

He said, once the present crisis is over, the commission will have to focus on its own management instead of stock indices.

Islam also said involvement of the banking sector with the capital market will have to be cut down.

If the banks make a huge investment and lose money, they will reduce their dividend declaration and finally their prices will decline.

The calculation of the banking sector's exposure to the stockmarket will also have to be redefined following international best practices, he added.

Khondaker Golam Moazzem, senior research fellow of Centre for Policy Dialogue, said the initiatives of the SEC will give a short-term remedy to the investors and the market will get some capital as most of the steps are related with banks.

The commission should declare a timeframe when it will implement the mid- and long-term measures, Moazzem said.

He also said most of the recommendations of the probe report on the stockmarket crash in February are yet to be implemented due to the absence of a timeframe.

Prof Salahuddin Ahmed Khan, who teaches finance at Dhaka University, said: “The SEC package is not motivational; it is a plan to change the structural format of the market.”

Khan said the SEC steps were not well researched as the commission lacks qualified officers.

The commission should appoint qualified consultants on contract and give them some administrative responsibilities, he added.

Prof Mahmood Osman Imam, another teacher of finance at Dhaka University, criticised a regulatory decision that compels sponsors, directors and promoters of a listed company to jointly hold at least 30 percent stake in the firm.

He said the move will help manipulate the share prices of those companies.

The manipulators will use the chance to manipulate these 46 companies' share prices as their sponsors and directors will have to buy 30 percent shares from the market, he said.

Imam also said the regulator should give the sponsors and directors longer deadline to increase their holding.

If the government takes decision to reduce cash reserve requirement and statutory liquidity ratio then the market will get some credit, he said.

But the government should not borrow much from the banking channel as the move will put the banks in severe liquidity crisis.

Abu Ahmed, a professor of economics at Dhaka University, said the market should be monitored closely to assess the immediate effects of the SEC steps.