Share prices on the Dhaka Stock Exchange plunged on Tuesday as investors went for panic selling, driven by rumours including one on a squeeze of margin loan by the regulators.
The benchmark general index of the DSE fell by 203.25 points, or 2.72 per cent, to close at 7,280.98 points on the day after the index had lost 88.38 points on Monday.
Soon after the trading began at 11:00am, the DSE general index started to slide as a rumour spread that the market would fall further as the Securities and Exchange Commission was going to give the merchant banks power to set margin loan ratio and the margin loan for the investors might be squeezed.
SEC officials started a meeting with officials of the Dhaka and Chittagong stock exchanges and merchant bankers’ association at 11:00am.
Although the market rebounded slightly for 10 minutes, the general index again started to slide heavily at 11: 25am and continued to slide till the closing as investors offloaded their shares, fearing further falls, said market operators.
Of the total 255 issues traded on the day, 233 declined, 20 advanced and two remained unchanged.
The decisions of the meeting at the commission were revealed to journalists by an SEC official after the closure of the trading at 3:30pm.
The meeting decided that the merchant
bankers, instead of the SEC, would set margin loan ratio for investors but there was a decision that the margin loan would be curtailed.
Currently an investor gets margin loan at a ratio of 1:2, which has been set by the SEC.
Market analyst Akter H Sannamat said that the share prices dropped heavily on the day following a rumour that the market would collapse again within few days.
‘A rumour was spread, probably by market manipulators, that the SEC would reduce margin loan for the investors,’ he added.
He said that many of the investors, who had bought shares when the market collapsed few days back, also went for profit taking selling.
Salahuddin Ahmed Khan, who teaches finance at Dhaka University, said that the Bangladesh Bank’s monetary policy announced on Sunday made investors confused as the central bank directed banks not to invest in unproductive sectors.
‘When the market collapsed in the third week of January, the central bank had directed commercial banks to reinvest in the capital market their profits made in the share market through merchant banks. But the BB did not clear how much the banks should reinvest in the market,’ he added.
Salahuddin also said that a rumour that the market would fall sharply very soon also made
the investors panicky as they were yet to recover fully from the losses they had sustained in the mid-January’s market collapse.
DSE president Shakil Rizvi, however, said, ‘The DSE index dropped on the day because of profit taking selling of shares after the stocks had gained for four days before Monday. It is very natural.’
He also claimed that there was no rumour in the market.
Shares of most of the major sectors like banks, non-bank financial institutions, insurance, fuel and power, textile, ceramics, chemicals and pharmaceuticals, and telecommunication shed prices on the day.
The daily turnover also decreased by Tk 139.14 crore and stood at Tk 938.49 crore.
United Commercial Bank topped the turnover leaders with 20.66 lakh shares worth Tk 44.46 crore traded on the day.
The other turnover leaders were Grameenphone, Titas Gas, BSRM Steels, Beximco, NBL, United Airways, Peoples Leasing and Financial Services, Union Capital, Prime Bank.
Deshbandhu Polymer was the biggest gainer of the day, posting 9.75 per cent rise in its share price, while the Meghna Condense Milk was the worst loser.
