Stocks crash-land on BB warning

Staff Correspondent | Published: 22:49, Jan 29,2017

 
 

Dhaka stocks slumped on Sunday with the key index of Dhaka Stock Exchange, DSEX, witnessing highest single-day fall in last three-and-a-half years following Bangladesh Bank’s call for tighter capital market monitoring to avoid any fresh crash in the market.
DSEX finished at 5,500.85 points on Sunday, shedding 2.09 per cent or 117.79 points, the highest single day fall after the decline of 125 points on July 23, 2013.
Investors, who were concerned regarding the market in last week ahead of BB’s monetary policy announcement, became more cautious on the trading floor on Sunday from the beginning of the session as BB’s announcement was scheduled to be made at the mid-trading session, said stockbrokers.
As a result of investors’ cautious participation in trading, prices of most traded scrips were on the decline till the BB announcement started to break out, they said.
Investors, however, went for indiscriminate share sales as soon as the investors through different media including online and television reports came to know about central bank’s call to Bangladesh Securities and Exchange Commission for tighter capital market monitoring to avoid any fresh market crash that could affect small investors again, stockbrokers said.
At the end of the day’s trading, prices of 275 companies out of traded 327 companies and mutual funds declined on the day and only 47 advanced, while rest 5 remained unchanged.
While briefing on monetary policy for the January-June period of this year, Bangladesh Bank governor Fazle Kabir said that for maintaining the gradual improvement of market after the 2010 market crash, it would require effective monitoring by the regulatory body to maintain soundness.
‘Otherwise it may create suspicion of severe effect of small investors again as it was observed earlier,’ he said.
Asked about the BB’s latest statement, former Bangladesh Securities and Exchange Commission chairman Faruq Ahmad Siddiqi said, ‘Although I do not think that the central bank gave any such statement regarding the area of Bangladesh Securities and Exchange Commission, and if given it was not right.’
‘But, of course the central bank has the responsibility to monitor that the banks do not overexpose them in the capital market which was the prime reason of the 2010 market crash,’ he said.
Expressing dissatisfaction over BB’s latest statement regarding capital market, DSE director Rakibur Rahman told New Age that the market was quite stable in recent times, but unnecessary carefulness had been driving the market toward significant fall.
Rakibur also said that the issue of BB’s latest remark was also discussed at the bourse’s board meeting held in the evening on Sunday and decided to observe the market trend for another two-three trading sessions before making decision whether the bourse will speak out regarding the excess regulatory steps or not.
The central bank governor came with the remark following recent bull-run of share prices that resulted in more than 1,100 points rise of DSEX in last one-and-a-half months, raising concerns about overheating of the market.
Following the nonstop surge in share prices, the BSEC expressed its concern at a meeting held on January 16 asking stakeholders of the capital market to strictly comply with securities rules in trading shares.
The regulator also provided a list of rules and regulations to the participants at the meeting asking them to comply with those strictly to prevent any sort of unstable state of the capital market.
In January, the Bangladesh Bank tightened banks’ capital market exposure monitoring following the recent bull-run.
The DSEX, however, had fallen by 88 points in two trading sessions before Sunday’s massive fall.
DS30, the blue-chip index of the bourse, fell by 1.72 per cent or 35.23 points, to close at 2,003.24 points on Sunday, the first trading session of the week.
The Shariah index, DSES, DSES, declined to 1,274.78 points, shedding 1.36 per cent or 17.70 points.
Turnover on the bourse also declined to Tk 1,137.15 crore compared with that of Tk 1,269.60 crore in the previous trading session.
BEXIMCO led the turnover chart with its shares worth Tk 57.53 crore changing hands. 

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