SEC restricts loan to cos having PE ratio above 75

The Securities and Exchange Commission (SEC) Wednesday restricted loan facilities to the companies whose price-earning (PE) ratio was above 75 with immediate effect, putting a lid on overvalued stocks.

The fresh directive will not be applicable for mutual funds, paper shares, poor performing Z-category companies, and newly shifted category and listed companies, meaning that as per previous directive the loan margin suspension will remain in force.

The commission also withdrew the ban on credit facilities of 28 companies.

The decision came at the 'commission meeting' with SEC Chairman Ziaul Haq Khondker in the chair.

"The companies having PE ratio over 75 will not be considered marginable securities ," said Mansur Alam, member of the commission.

There are 37 companies having PE ratio of over 75, including Legacy Footwear, Ambee Pharma, Rangpur Foundry, BangladeshPlantation, Islami Insurance BD. Ltd, BD Autocars, BDCOM Online Ltd, Summit Alliance Port Limited, Dacca Dyeing and Manufacturing Company, Bangas, Janata Insurance, Gulf Foods, Alltex Industries, Miracle Industries, 1st BSRS, In Tech Online Ltd, Purabi General Insurance, Meghna Cement, Beximco Synthetics, Desh Garments, Daffodil Computers, Monno Ceramic, Eastern Lubricants, Lafarge Surma Cement, Modern Dyeing, Kay and Que, BD Welding Electrodes, GQ Ball Pen, BSC, Aramit Cement, Bangla Process, Fine Foods and Anlima Yarn, according to the Dhaka Stock Exchange (DSE).

Moin Al Kashem, a market expert, said, "It's a good move and the decision will ensure concentration on fundamentally strong shares."

On October 21, 2009 the SEC stopped providing or disbursing of any further margin loan or credit facilities against shares of 28 companies.