All previous records of Dhaka Stock Exchange broken
Investors earned crores but some also lost their last paisa at the Dhaka Stock Exchange in 2010.
Heavy inflow of liquidity and entry of fresh investors pulled up the stock market to its historic height this year, surpassing all the previous the records.
It was a windfall year for investors, although a record fall in December created panic in them.
The index rose by 82.87 per cent, or 3,754 points, in 2010 from 4,535.53 points at the end of 2009. The general index of the DSE reached its all-time high at 8,918.51 points on 5 December, 2010.
The average daily turnover in 2010 was Tk 1,643.40 crore, up by Tk 1,038.77 crore from Tk 604.63 crore in 2009.
The DSE recorded it’s highest-ever single-day turnover of Tk 3,249.58 crore on December 5.
‘Banks and non-bank financial institutions injected excess liquidity into the capital market.’ said market analysts.
Besides, new investors participated massively in the capital market, they added.
The total market capitalisation in 2010 was Tk 3,50,800.58 crore, posting a 84.81 per cent rise from that in 2009.
The investor’s beneficiary ownership account also increased to 33 lakh from 13 lakh in 2009.
Salahuddin Ahmed Khan, a former chief executive officer of the DSE who has returned to his original occupation of a teacher of finance at the Dhaka University, said, ‘Investors’ participation in the capital market increased day by day over the year, turning it into a very important economic sector.’
The record growth also helped the government to get more than five times the revenue. In 2010, the government received Tk 315 crore taxes at source against only Tk 62 crore a year ago.
The Securities and Exchange Commission issued various directives as the market became overheated but the overall situation was better than that in 2009, said Salahuddin.
The SEC issued a total of 81 directives in 2010 to investors and the market, with the directive on margin loan changing frequently last year. The DSE followed the free-market capitalization system to calculate the market index without the SEC’s approval, which was the talk of the town.
‘The market regulator relaxed the book building method, and as a result some low-profile companies used the chance to increase their share prices,’ said a stockbroker.
The SEC issued a directive on the limitation of time to change the face value of any company, and as a result the share prices of some low- and high-profile companies became overvalued, he added.
The High Court stayed the net asset value-based margin loan calculation system, but the Supreme Court stayed the HC order last year.
Salahuddin said that investor’s participation had increased gradually but the market did not have enough supply and as a result became overheated.
The SEC and Bangladesh Bank pressured the investors to cool down the overheated market, he added.
The general index of the DSE experienced a record plunge of 551 points on December for the first time in its 55 years of history.
After the record fall in the market, the SEC postponed all its stringent directives to stop further fall.
Akhtar H Sannamat, managing director of Prime Finance and Investment, said that the SEC’s short-term directives had created panic among the investors, and as a result the pressure to sell increased and the market fell sharply.
The SEC should issue long-term directives to stabilise the market, Sannamat added.
However, the SEC made some positive changes in some of the securities laws. The change in the IPO (initial public offering) rules was a notable one, and after amendments to the regulations many non-listed companies are now showing interest in participating in the market.
According to the stock market’s data, there were 23 IPOs, worth around Tk 3,500 crore, last year, against 15 with a value of Tk 1,900 crore in 2009.
Of this year’s new arrivals, 11 were equity securities, 10 mutual funds or investment securities and two convertible bonds.
The demand for supply of more shares increased extremely in this overheated market, so Tk 3,500 crore worth of shares is not enough supply, and more supply is needed to control the overheated market, said a merchant banker.
Finally, the DSE finished a boom year on an upbeat mood with its benchmark general index and turnover gaining on the closing day of 2010.
