Sunday, April 14, 2024

Credit crisis hits stocks again

Share prices slide for second day
Share prices at the Dhaka Stock Exchange plunged on Sunday as the investors continued to face credit crunch, said market operators.
The benchmark general index of the DSE dropped by 141.29 points, or 1.87 per cent, to close at 7,429.59 points. The DSE’s general index shed 315.57 points at 1:40pm but regained at the closing hour of trading.
Many of the investors, who had sustained heavy losses in the last few days’ massive slides, said that although the Securities and Exchange Commission had increased the margin loan for them, they were facing fund shortage and were thus unable to buy shares at relatively lower prices to make up for their losses.
‘I had earlier taken loan at a ratio of 1:1 but the value of my portfolio [total shares] came down by 30 per cent because of the recent slump of prices. Now I cannot sell my share, nor can I buy shares for adjustment as the brokerage house refused to increase my margin loan,’ said Arif Hossain, a general investor, on Sunday.
He said that many of the investors were selling shares at a loss to get out of the market as further fall in share prices would diminish their total investment.
‘We are still panicked about the market situation as we are not getting loans. Although the SEC assured us we would get loans after the record plunges last week, we are not getting them,’ said Zobaer Ahmed.
In the last two days the DSE’s general index lost 256.08 points after the market gained by 1,191 points on Tuesday and Wednesday after six days of massive slump, including a 660 point slump in just 50 minutes of trading on Monday.
After the slumps the investors staged street demonstrations and the SEC and Bangladesh Bank took some measures to boost their confidence and calm them down.
‘The SEC’s measures now seem to be eyewash as the brokerage houses and merchant banks have not increased the margin loan by a single taka,’ said Shabbir, another unlucky investor.
The SEC increased the margin loan ratio to 1:2 from 1:1.50, decided to give the netting facility for all securities and relaxed the rules on investment of merchant banks.
The Bangladesh Bank, in response to the government’s directive, assured private banks that it would be lenient if they invest in the capital market and would turn a blind eye on the industrial loans that were used in the capital market.
Market analysts said that the investors were anxious about the current market situation as the credit shortage has cooled down the market.
The banks and non-bank financial institutions were selling their stakes to make profits out of the shares they had bought during the slumps, they added.
Besides, the banks are now more cautious about investing in the share market and are not providing much funds to their subsidiary merchant banks, said a merchant banker.
Commenting on Sunday’s market trend, analyst Akhtar H Sannamat said, ‘The credit crisis is the main reason for volatility in the capital market… Life support is not a solution for the market. The government should take some initiative to increase liquidity flow into the capital market from banking channels.’
Salahuddin Ahmed, a former chief executive officer of the DSE who has returned to his original profession of teaching finance at Dhaka University, said, ‘Liquidity flow should be ensured for a sustainable market and to restore confidence in investors.’
‘The present situation is an unusual price correction in the market and I request the investors not to be worried,’ he added.
Out of the total of 247 issues traded on the DSE on Sunday, 215 declined and 32 advanced.
The daily turnover at the bourse stood at Tk 1,166.62 crore, up by Tk 103.25 crore from that of the previous day.
The NBL topped the turnover leaders with 33.39 lakh shares worth Tk 58.05 crore on the day.
The rest of the other turnover leaders were the United Commercial Bank, Beximco, Grameenphone, AB Bank, Titas Gas, United Airways, Square Pharmaceuticals, Southeast Bank and Bay Leasing and Investment.
Square Pharmaceuticals was the biggest gainer of the day, posting 6.09 per cent rise in its share price, while the City General Insurance was the worst loser.


Via: New Age

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