Newly-Listed cos’ Shares
BSEC finds abnormal price rise linked to margin loan facility
The Bangladesh Securities and Exchange Commission has found that the margin loan facility for buying the newly-listed companies’ shares is playing a key role in abnormal rise in the share prices of the companies, BSEC officials said. They said the commission, based on the finding, might review the facility in a bid to prevent the abnormal rise in the share prices of the companies.The commission has observed that the share prices of most of the newly-listed companies rose abnormally in first few days after their debuts at the stock exchanges, a senior BSEC official told New Age last week.
The BSEC after the market crash in 2010-2011 allowed stockbrokers and merchant banks to issue margin loans to their clients for purchasing the newly-listed companies’ shares in the first 30 days after their debuts, he said.
The commission issued the order considering the dullness of the capital market and investors’ low attraction for the new companies’ shares, the official said.
BSEC executive director Saifur Rahman told New Age that considering the present market condition the commission might not scrap the facility right now, but the commission was monitoring its role behind the abnormal rise in share prices of the newly-listed companies.
The BSEC in November 2012 issued a directive allowing stockbrokers and merchant banks to give the facility to their clients.
The directive also allowed them to give loan facility for purchasing any existing listed security in 1st-30st trading day in case of change in category.
The share prices of IFAD Autos rose by 125.67 per cent or Tk 37.7 on Thursday, the debut trading day of the company at the Dhaka Stock Exchange, despite a plunge in its first quarterly profit.
The profit of IFAD Autos for July-September, 2014 period fell sharply by 46 per cent to Tk 5.49 crore compared with that of Tk 10.21 crore in the same period of the previous year.
The share prices of Khan Brothers PP Woven Bag Industries skyrocketed by 680 per cent to Tk 76.60 on its debut trading day in November last year at the DSE. The company’s shares were traded at Tk 25.80 each on Sunday.
Market operators said that in most cases, the abnormal price movement of the newly-listed companies was not logical considering the companies’ fundamentals.
Margin facility for purchasing the newly-listed companies’ shares might be a reason for the trend, they said.
The share prices of all the companies which got listed with the capital market in last one and a half years rose abnormally in first few days after their debuts.
Shahjibazar Power Company, Western Marine Shipyard, Khulna Printing, Appollo Ispat Complex, Mozaffar Hossain Spinning Mills, Emerald Oil Industries, Far Chemical Industries, Far East Knitting and Dyeing Industries, Hwa Well Textiles, Matin Spinning Mills, The Peninsula Chittagong, Ratanpur Steel Re-Rolling Mills, Saif Powertec, Shurwid Industries and Tung Hai Knitting & Dyeing are some other companies which witnessed sharp fall in their share prices after surges in first few days after their debuts.
-With New Age input
