Star Business Report
Stocks rebounded yesterday as state-run banks entered the scene to rescue the troubled market from a slump in investor confidence and downturn for four days.
The benchmark DSE General Index surged about 15-month high at 121.71 points or 5.03 percent to close at 2538. 37.
The DSE All Shares Price Index advanced 98.47 points, or 4.89 percent to 2112.08. The DSE-20 blue chip index gained 97.02 points, or 4.85 percent to 2094.92. Indices on the Chittagong Stock Exchange also bounced back.
State-run banks came as part of the government intervention for shoring up investor confidence and providing liquidity support to the market, which had earlier endured a liquidity shortage amid fund outflow and low participation of institutional investors, mainly from the private sector.
“I am happy with the recovery of the market. The government initiative has helped restore some confidence. I expect the confidence will continue to build up in the coming days,” said Faruq Ahmad Siddiqi, chairman of Securities and Exchange Commission (SEC).
Thanks to a meting between Finance Minister AMA Muhith and SEC Chairman Faruq Ahmad Siddiqi on Wednesday that helped pave the way for three state banks entering the stock market in a big way.
Officials said these public sector institutions, which have adequate liquidity, would stay as long-term players and extend liquidity support in case the market suffers from fund constraints.
According to Bangladesh Bank statistics, state banks held about more than Tk 10,000 crore in excess liquidity out of Tk 20,275 crore by December 31, 2008.
Three banksSonali, Janata and Agraniand a public sector insurance company, Shadharan Bima Corporation, bought shares.
Analysts praised the move saying that it has sent positive signal to the investors who became shaky in investing in the volatile market, which plummeted to one-and-half-year lowest Wednesday amid panic sell-offs.
“It gives a signal that government is concerned about the market. The news about entry of public sector financial institutions has created a positive impact among investors,” said Yawer Sayeed, managing director and chief executive officer of Aims of Bangladesh, an asset management company.
Gainers beat losers 226 to 30. Only three issues closed unchanged.
All the sectors ranging from market bellwether banking sectors to laggard jute finished higher amid increased participation of both retail and institutional investors.
Turnovers on the Dhaka Stock Exchange increased.
“The continuous stabilisation effort from the regulator and government seems to have a positive impact on the market,” according to a market analysis of Equity Partners Securities Ltd (EPL), an investment bank.
The SEC increased the margin loan extension limit of brokers twice from 1:0.67 to 1: 1 Tuesday and 1:2 Wednesday respectively to help retail investors, many of whom found their funds dried up in a six-week volatility.
The regulator also awarded merchant banking licence to state-owned Janata Bank as part of its move to stabilise the market.
“These latest developments seem to have stabilised the shaky confidence of the investors,” said the EPL.
Analysts found various indicators of the economy to be good but factors like investor confusion about the present government stance on the capital market, fear of slowdown in corporate earnings amid global financial meltdown and rumours have hurt the market.
They also linked prolonged volatility in stock prices to a gradual outflow of funds from the market, which had witnessed a surge in liquidity flow amid anti-corruption and anti-tax evasion drives during the initial period of immediate past caretaker government.
“It appears that many of those who found the market as a safe heaven during the caretaker government regime are now leaving,” said a broker at the Dhaka Stock Exchange.
Institutional investors’ low participation added fuel to the worsening investor confidence, market players said.
“We are very much present in the market. We have invested more than Tk 200 crore in a couple of days of downturn,” said Ziaul Haque Khondker, managing director of state investment bank ICB (Investment Corporation of Bangladesh.)
He said investor confidence has restored much after the government move. “Our presence in the market will continue,” he said, “ Entry of state banks and financial institutions in a big way will also contribute to the long term benefit of the market as well as investors.”
Syed Abu Naser Bukhtear Ahmed, managing director of Agrani Bank, admitted that the bank invested in shares on the day.
“We have entered the market in a big way for the first time and our main ambition is to keep the market vibrant,” he said.
Courtesy: thedailystar.net
