Stocks plunge as margin loan ceiling comes into effect February 1

Staff Correspondent | Published at 10:55pm on January 26, 2021

Dhaka stocks plunged on Tuesday as many brokerage houses and merchant banks went for forced sales to comply with a BSEC instruction over margin loan interest rate.

The Bangladesh Securities and Exchange Commission on January 13 set the upper ceiling on interest rate of margin loans provided by stockbrokers and merchant bankers to investors at 12 per cent that includes a charge of maximum 3 per cent spread over cost of funds. The directive will come into effect on February 1.

DSEX, the key index of Dhaka Stock Exchange, lost 1.63 per cent, or 94.55 points, to close at 5,695.37 points on Tuesday.

The DSEX lost 141 points in the last three sessions.

The key index started falling from the very beginning of Tuesday’s session and descended more firmly as the session progressed to end deep into the negative trajectory as investors went for heavy share sales, market operators said.

As the deadline nears, a number of brokerage houses and merchant banks went for forced sales as they had charged above the ceiling.

EBL Securities in its daily market commentary said, ‘The market has steadily been slowing down as many merchant banks insisted on adjusting loan ratio as they are unable to provide loans at such a low rate due to their high cost of funds while the highest spread allowed on margin loans is only 3 per cent.’

The market also observed a cautious selling approach ahead of year-end declarations from companies amid volatility, it said.

Market operators said that some investors went for panic sales after observing the plunge on the market.

Share prices of 26 out of 30 large capitalised companies under the DS30 index dropped on Tuesday.

Share prices of BEXIMCO, Beximco Pharmaceuticals, LankaBangla Finance, Grameenphone and LafargeHolcim Bangladesh plunged on Tuesday.

DS30, a composition of 30 large capitalised companies, also declined by 1.77 per cent, or 39.01 points, to close at 2,162.99 points on the day. Average share price of all the sectors except food dropped on Tuesday.

Share prices non-bank financial institution, general insurance, energy and bank sectors plunged by 3.7 per cent, 2.1 per cent, 1.8 per cent and 1.3 per cent respectively.

Turnover on the DSE dropped to Tk 1,125.45 crore on Tuesday compared with that of Tk 1,585.22 crore in the previous session.

Of the 360 scrips traded on the DSE on Tuesday, 255 declined, 75 advanced and 75 remained unchanged.

Shariah index DSES also shed 1.34 per cent, or 17.43 points, to settle at 1,279.47 points.

Bangladesh Export Import Company led the turnover chart with its shares worth Tk 142.85 crore changing hands on the day.

Energypac Power Generation, Robi, LankaBangla Finance, Beximco Pharmaceuticals, British American Tobacco, Summit Power, Square Pharmaceuticals, LafargeHoilcim Bangladesh and IFIC Bank were the other turnover leaders on the day.