Dhaka stocks loses steam on regulatory measures

Dhaka stocks ended its four-week bull run last week after market regulators, stock exchange authorities and Bangladesh Bank took separate steps to cool down the swelling market.

The benchmark general index of the Dhaka Stock Exchange shed 89.91 points, or 1.33 per cent, in the past week to close at 6,653.29 points on Thursday.

Market operators said that decisions of regulators and central bank squeezing margin loan and investment of financial institutions on capital maker pulled down slightly over-priced stocks that had grown for four consecutive weeks.

The Bangladesh Bank on Sunday asked non banking financial institutions with extra investment of their paid-up capital and 25 per cent of their reserve on share market to withdraw additional investments by December 2010.

The stock exchange authorities halted trading of shares of a number of companies because of unusual hike in their prices.

The Securities and Exchange Commission on Tuesday decided to enforce a margin loan disbursement system based on current market price of any share and its net asset value.

The new calculation method virtually squeezed loan facilities for the investors and the market responded with the DSE general index plunging by 128 points on Wednesday.

But in the final session on Thursday, the index moved up marginally.

Most of the major sectors shed prices during the week. Banks and non-banking institutions declined by 2.7 per cent each.

Insurance companies closed negative after a long rally of gains in recent weeks. General insurance and life insurance companies dropped by 0.12 per cent and 2.65 per cent respectively.

Telecommunications sector slipped by 3.0 per cent and fuel and power sector by 2.2 per cent.

The average daily turnover declined by 6.30 per cent to Tk 1,774.03 crore from the previous week’s Tk 1,861.24 crore.

Capital market analysts said that the market fell last week because of regulatory interventions.

They said the prices of most of the shares have remained over-priced even after last week’s fall and the market needs more correction.

Salahuddin Ahmed, a former chief executive officer of DSE, said that the market witnessed a correction last week after the regulatory interventions.

Mohmood Osman Imam, who teaches finance at Dhaka University, however, said the market needs more correction as most of the shares are still over-priced.

The SEC officials will sit today with authorities of Dhaka and Chittagong stock exchanges and merchant bankers to discuss the market situation.