The Securities and Exchange Commission on Tuesday halted trading on the country’s two bourses, for the second time in the past eight days, more than an hour before the scheduled closure to stop a steep slide in share prices.
Angry investors came out on the streets from different brokerage houses after the commission had stopped the trading to protest the continued fall in share prices for the fifth trading day but no untoward incident took place as a large number of law-enforcers were deployed in the area.
The SEC stopped share trading on Dhaka Stock Exchange at around 1:40pm after the general index of the country’s premier bourse fell by 243 points, or 3.29 per cent, on panic-driven selling pressure of investors. The key index of Chittagong Stock Exchange plunged by 298 points, or 2.20 per cent, on the day.
Trading on the bourses will resume today at 11:00am, said officials.
The benchmark index of DSE had lost 313 points in the previous four days as panic had spread among investors due to a continued liquidity crisis.
Different government organisations, like the Investment Corporation of Bangladesh and some nationalised commercial banks, had gone for bulk purchase of shares to check the plunge but on Tuesday they could not stop the massive slide as investors’ confidence eroded further after the turnover on the DSE had hit a nine-month low on Monday.
Earlier on January 10, the capital market regulator stopped trading on the Dhaka bourse and investors across the country came out on the street in protest against the continued fall in share prices after the DSE general index had lost 660 points in just 50 minutes of trading preceded by another 600-point slide on January 9.
The SEC and the Bangladesh Bank halted the steep slide at that time by increasing the ceiling of margin loan ratio for investors and assuring that the banks would be dealt with leniency if they overinvested in the capital market. But none of the decisions has made any difference so far.
‘The investors have been gripped by panic since the stock market plunge in the second week of January. The falls in the last four days indicate that a massive crash was in the offing. A number of government organisations had been trying to boost the market but they failed to reduce the pace of the slide in share prices on Tuesday, prompting the SEC to suspend trading on the DSE more than one hour ahead of the scheduled time,’ said an SEC official.
Retail investors started a street demonstration soon after the share trading had been suspended on Tuesday, demanding explanation of the market’s behaviour, chanting slogans against the leaders of the bourses and SEC officials, and demanding their resignation.
However, the presence of a large police contingent on the road in front of the DSE building restrained them from making any illegal act.
Several hundred investors gathered in front of the DSE building but they were encircled by the law-enforcers.
Later in the evening, the commission convened an emergency meeting with high officials of the bourses and decided to expedite the setting of face value of every share at Tk 10 and to increase the deposit-free trading limit for stock-dealers from Tk 5 crore to Tk 15 crore.
Officials of the bourses also sat in a brainstorming session with the merchant bankers to find a way to put and end to the bear run and boost investors’ confidence.
‘We will go to the government high-ups with our recommendations for increasing liquidity on the capital market,’ DSE president Shakil Rizvi told a news conference.
Shakil said investors’ confidence level was low and they felt jittery.
He urged investors to be patient.
SEC executive director Anwarul Kabir Bhuiyan expressed the hope that the market would rebound soon.
The small investors who entered the share business late last year lured by the then booming market have so far lost more than half of their capital to the bear run that began in the second week of December.
The DSE general index that had risen 82 per cent in 2010 started to nosedive as a cash crunch hit the market with the commercial banks cashing in their stocks as per a Bangladesh Bank directive.
Commercial banks, which made hefty profits by overinvesting in the capital market, have already withdrawn a huge amount of investment in stocks, market analysts said.
Although the central bank, after the January 10 share market crash, assured the banks that it would be lenient on them for overinvesting in the capital market, banks are still reluctant to invest in securities considering the high risks involved, bankers said.
The central bank, meanwhile, provided the Investment Corporation of Bangladesh a Tk 200 crore fund to purchase shares and thus ease the liquidity crisis to some extent.
The ICB and three nationalised commercial banks had bought shares worth more than Tk 450 crore on Sunday and Monday to halt the massive slide as general investors, who had incurred heavy losses, could not go for share purchase.
‘We bought Tk 46 crore worth of shares today [Tuesday]. We also wanted to buy more shares in the last trading hour after 2:00pm but the market had already taken such a steep plunge that the trading had to be suspended,’ said a high official of the ICB.
Market analysts pointed at liquidity crisis as the reason for the latest round of share market slides as large investors, like banks, non-bank financial institutions, and some brokerage houses, had remained inactive.
‘This market will not sustain until the big investors start to trade in a proactive manner,’ one of the analysts said.