About 25 per cent of the listed mutual funds have availed the opportunity of issuing stock dividends for re-investment to their unit holders, but poor dividends announced by them have dejected the investors as most of the units had lost prices in recent times.
A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities.
The Bangladesh Securities and Exchange Commission on July 24 amended the Mutual Fund Rules 2001 allowing all the mutual funds to issue stock dividends to its unit holders for re-investment.
Following the amendment, 10 among the 43 listed mutual funds in the capital market declared 2.50 to 12 per cent stock dividends to their unit holders for re-investment, Dhaka Stock Exchange data shows.
‘I opposed the idea of giving the mutual funds the scope to issue stock dividends for re-investment from the beginning,’ former Bangladesh Securities and Exchange Commission chairman Faruq Ahmed Siddiqi told New Age.
‘Mutual funds should not get the opportunity of increasing their size within its tenure as most of the investors want profits from the units within a certain period of time,’ Faruq Ahmed said.
‘The profits of the units will be diluted after issuing stock dividends, which will reduce the net asset value of the units,’ he added.
However, Mahmood Osman Imam, a professor at the finance department of Dhaka University, thinks the investors would be benefited in the long run.
‘The scope of issuing stock dividend for re-investment will have a positive impact on the market,’ Osman Imam said.
First Bangladesh Fixed Income Fund declared 12 per cent stock dividends while AB Bank First Mutual Fund, EBL First Mutual Fund, EBL NRB Mutual Fund, IFIC Bank 1st Mutual Fund, NLI First Mutual Fund, ‘Reliance One’ The First Scheme of Reliance Insurance Mutual Fund and Southeast Bank First Mutual Fund and Trust Bank 1st Mutual Fund declared 10 per cent stock dividends and Popular Life First Mutual Fund 2.50 per cent.
Due to the market’s sluggish trend and declaration of poor dividends most of the unit prices of the mutual funds declined by 10-30 per cent in the recent time.
The unit price of AB Bank First Mutual Fund declined by Tk 1.90 in the last 12 trading sessions while EBL First Mutual Fund lost Tk 1.30 and EBL NRB Mutual Fund lost Tk 1.00 in the last 11 trading sessions.
-With New Age input
