The Securities and Exchange Commission on Monday took a number of measures, including increasing the margin loan ratio for investors, to stop the massive slide of share prices.
The SEC raised the margin loan ratio to 1:2 from 1:1.50 in a bid to increase the purchasing power of the share investors who have sustained heavy losses in the last few day’s fall, said its chairman Ziaul Haque Khandakar at a press conference.
The SEC officials, along with the chiefs of the country’s two bourses and merchant bankers, held the emergency press conference after a record fall of 660 points of the general index of the Dhaka Stock Exchange in 50 minutes of trading on Monday.
The SEC suspended trading just 50 minutes after it started on Monday as the DSE’s general index lost a total of 1,829 points in six trading days, prompting angry investors to go on the rampage across the country.
THE Commission chairman said that they had suspended the trading as the prices of shares were falling unusually. ‘The trading will resume tomorrow.’
The SEC in the meeting with bourses chiefs and merchant bankers also decided to send 14 companies, which were sent to the spot market last month due to the abnormal price hikes, to normal trading with effect from today, said Khandakar.
The 14 companies are Pharma Aids, Aziz Pipes, Ambee Pharmaceuticals, Bangladesh Autocars, CMC Kamal, Dacca Dyeing and Manufacturing Company, Desh Garments, Miracle Industries, Mithun Knitting and Dyeing, Safko Spinning Mills, Standard Ceramic Industries, Tallu Spinning Mills, United Airways and Sonali Aansh Industries.
The SEC also decided that investors would get netting facilities for the trading of all securities from today. It had earlier barred investors from getting netting facilities for non-marginable securities.
The SEC also postponed a provision that bars merchant banks from providing loans to the investors that are worth more than five times the equity of the banks.
It had earlier increased the margin loan ratio to 1:1.5 from 1:1, but most of the brokerage houses and merchant banks failed to provide loans to investors at maximum level because of liquidity shortage.
Khandakar said that the Bangladesh Bank would relax some provisions for the banks so that their merchant banking wings can invest more in the share market.
The SEC’s chief said that the capital market was suffering from liquidity crunch.
He hoped that the measures taken by the SEC would boost the confidence of the panic-stricken investors.
When his attention was drawn to the investors’ allegation that the frequent changes of the SEC’s decisions has resulted in the present crisis in the capital market, he said, ‘It is
normal for the market regulators to change decisions. What we did was an example of flexibility. When the share prices went too high, we tried to intervene’
When asked point blank whether the SEC was responsible for the current crisis, he said, ‘We tried to make the investors aware of the risk of an over-heated market. It is true that all of our decisions were not right. No regulator can take decisions that are 100 per cent right anywhere in the world.’
A member of the SEC said that there was excess liquidity in the banking sector, but a leader of merchant bankers’ association said that they had already given loans to the highest limit and the central bank would have to allow them to invest more.
