The benchmark index of the Dhaka Stock Exchange (DSE) plunged 90.56 points, its six-month single-day fall, on Wednesday but setting a record turnover that crossed Tk 14.0 billion mark for the first time.
Traders said strong rumours of further curbs on loan margin ratio and suspension of netting facility has put an end to the 16th straight session gaining streak.
A member of the SEC strongly ruled out such an intervention billing the rumour as 'bogus'.
Sources close to the matter said, "Somebody from the Securities and Exchange Commission asked the merchant bankers to temporarily suspend netting facility." Analysts, however, said there could have been normal profit taking after the long rally.
The plunge could have been deeper but modest buying in the closing hour shrank the day's deepest decline to record at 4848.68 points from 4640.25 points intra-low.
The intra-day volatility was more than 200 points, which is the highest ever in DSE.
Eventually, the benchmark DSE General Index (DGEN) dipped 90.56 points or 1.88 per cent --- its highest single-day fall since December 20 last year --to close at 4704.14. Earlier on December 20, 2008, it lost 81.40 points.
Showing posts with label DSE News. Show all posts
Showing posts with label DSE News. Show all posts
5 Jan 2010
Flawed DSE index and indulgent regulator
The index of a major bourse represents the performance of the stock market of a country and, to a great extent, highlights the investors' sentiment on the state of its economy.
However, there could be exceptions. The stock market developments, primarily based on investors' interest in stocks, sometimes may not reflect the situation prevailing in other areas of the economy. Bangladesh market is a testimony to that fact.
But what if the indices of the country's premier bourse are calculated deliberately on flawed premises, ignoring internationally accepted practices?
Newspaper reports have revealed that the Dhaka Stock Exchange (DSE) has been, deliberately or otherwise, following a flawed system to calculate its daily index. The securities regulator -- the Securities and Exchange Commission (SEC) -- was aware of the folly but ignored it.
The point that the newspaper reports have highlighted is that the DSE has been counting index points in the case of a debutant company from the very first day of its trading. Moreover, while calculating index it takes into account the face value of a stock, not the premium value, if there is any.
The incumbent chairman of the SEC has admitted that the index calculation by the DSE is flawed since the first day trade of a company on a stock does not provide benchmark from where points could be calculated.
The SEC has already asked the DSE authorities to start counting index points in the case of a debutant company from the second day of its trading.
But why have the internationally accepted best norms of index calculation -- that the DSE had agreed to introduce back in 1998 -- been ignored this time?
The securities regulator, too, cannot shirk its responsibility. It is expected to see that information given by the bourses for the consumption of the investors are correct, not manipulated ones.
Had the DSE followed a correct method of calculation, its index would not have reached the present high level.
For instance, on the first trading day of Grameenphone, the largest ever issue listed with the country's bourses, the DSE took into account the face value of its share at Tk. 10, not its premium value of Tk. 60, for index calculation. This has resulted in the skyrocketing of the general index of DSE (DGEN). A total of 764 points were added to the DGEN on the day and the GP alone contributed more than 400 points.
Interestingly, the Chittagong Stock Exchange (CSE), country's second yet smaller bourse, however, did follow the standard practice of index calculation. It did calculate the index points of GP on the second day of its trading to give a correct picture.
This quantum jump of the price-weighted index, where price movement of even a single security does heavily influence the value of the index, did otherwise send wrong message to general investors, particularly the small ones. Encouraged by the market-trend, more and more people, in the meanwhile, have been attracted to a market where most stocks are highly over-priced and, the possibility of ordinary investors' being burnt in the event of the worst happening, can not be ruled out.
Many small investors have already lost a large part of their investment but they are still hanging on with a hope to recover the loss.
It is not befitting for anyone, particularly among the DSE top brass, to bask in the glory of high growth of the market, genuine or otherwise. They do need to advise the investors to be cautious in making investments in an overheated market and not appear before the media all the time when the index is up.
The SEC in a meeting with the chief executive officers of the bourses Tuesday asked to follow the method of calculating index for a debutant company from the second day of its trading. The SEC order will be applicable in the case of next debutant issue.
So, the present index calculated wrongly would not be corrected. That is what, actually, the authorities of the bourse did, perhaps, want the most. For, if the wrongs are righted the DGEN would come down to around 3000. The DSE cannot afford such a drastic fall in index since it would leave a negative impression among the investors about the market. For the greater interest of the market, one might accept the latest SEC directive.
But, at the same time, one will have some valid reasons to question the 'wisdom' of those, past and present who missed up the issue of index calculation. It is a technical matter and most investors, institutional investors included, are not aware how it is done. But the regulator must be having the requisite expertise to examine the issues involved in index calculation. It should then explain why it has not been able to apply this expertise when mistakes, deliberately or otherwise, were committed while calculating the index.
However, there could be exceptions. The stock market developments, primarily based on investors' interest in stocks, sometimes may not reflect the situation prevailing in other areas of the economy. Bangladesh market is a testimony to that fact.
But what if the indices of the country's premier bourse are calculated deliberately on flawed premises, ignoring internationally accepted practices?
Newspaper reports have revealed that the Dhaka Stock Exchange (DSE) has been, deliberately or otherwise, following a flawed system to calculate its daily index. The securities regulator -- the Securities and Exchange Commission (SEC) -- was aware of the folly but ignored it.
The point that the newspaper reports have highlighted is that the DSE has been counting index points in the case of a debutant company from the very first day of its trading. Moreover, while calculating index it takes into account the face value of a stock, not the premium value, if there is any.
The incumbent chairman of the SEC has admitted that the index calculation by the DSE is flawed since the first day trade of a company on a stock does not provide benchmark from where points could be calculated.
The SEC has already asked the DSE authorities to start counting index points in the case of a debutant company from the second day of its trading.
But why have the internationally accepted best norms of index calculation -- that the DSE had agreed to introduce back in 1998 -- been ignored this time?
The securities regulator, too, cannot shirk its responsibility. It is expected to see that information given by the bourses for the consumption of the investors are correct, not manipulated ones.
Had the DSE followed a correct method of calculation, its index would not have reached the present high level.
For instance, on the first trading day of Grameenphone, the largest ever issue listed with the country's bourses, the DSE took into account the face value of its share at Tk. 10, not its premium value of Tk. 60, for index calculation. This has resulted in the skyrocketing of the general index of DSE (DGEN). A total of 764 points were added to the DGEN on the day and the GP alone contributed more than 400 points.
Interestingly, the Chittagong Stock Exchange (CSE), country's second yet smaller bourse, however, did follow the standard practice of index calculation. It did calculate the index points of GP on the second day of its trading to give a correct picture.
This quantum jump of the price-weighted index, where price movement of even a single security does heavily influence the value of the index, did otherwise send wrong message to general investors, particularly the small ones. Encouraged by the market-trend, more and more people, in the meanwhile, have been attracted to a market where most stocks are highly over-priced and, the possibility of ordinary investors' being burnt in the event of the worst happening, can not be ruled out.
Many small investors have already lost a large part of their investment but they are still hanging on with a hope to recover the loss.
It is not befitting for anyone, particularly among the DSE top brass, to bask in the glory of high growth of the market, genuine or otherwise. They do need to advise the investors to be cautious in making investments in an overheated market and not appear before the media all the time when the index is up.
The SEC in a meeting with the chief executive officers of the bourses Tuesday asked to follow the method of calculating index for a debutant company from the second day of its trading. The SEC order will be applicable in the case of next debutant issue.
So, the present index calculated wrongly would not be corrected. That is what, actually, the authorities of the bourse did, perhaps, want the most. For, if the wrongs are righted the DGEN would come down to around 3000. The DSE cannot afford such a drastic fall in index since it would leave a negative impression among the investors about the market. For the greater interest of the market, one might accept the latest SEC directive.
But, at the same time, one will have some valid reasons to question the 'wisdom' of those, past and present who missed up the issue of index calculation. It is a technical matter and most investors, institutional investors included, are not aware how it is done. But the regulator must be having the requisite expertise to examine the issues involved in index calculation. It should then explain why it has not been able to apply this expertise when mistakes, deliberately or otherwise, were committed while calculating the index.
30 Dec 2009
24 listed companies will be relegated to 'B' category from the existing 'A'
Twenty-four listed companies will be relegated to 'B' category from the existing 'A', as paper share is not allowed for trading under 'A' category from January .
The Dhaka Stock Exchange disclosed names of the companies on its website yesterday. The firms failing to transform their paper shares into electronic ones by December 31 face this degradation from January 3.
The companies are Azadi Printers, Bangladesh Hotels, Bangladesh Plantation, Bangladesh Services, Eastern Lubricants Blenders, The Engineers, Fine Foods, Gemini Sea Food, Hill Plantation, Himadri, Jute Spinners, Kohinoor Chemical Company (Bangladesh) , Libra Infusions, Monno Ceramic Industries, Monno Jutex Industries, Monno Jute Stafllers, National Tea Company, Orion Infusion, Pharma Aids, Prime Textile Spinning Mills, Renwick Jajneswar & Company (Bangladesh) , Saiham Textile Mills, Sinobangla Industries and SonaliAansh Industries.
Earlier in July this year, the Securities and Exchange Commission announced that paper share will not be allowed for trading under 'A' category from January next, as paper shares create problems in settling those in an electronic trading system.
The Dhaka Stock Exchange disclosed names of the companies on its website yesterday. The firms failing to transform their paper shares into electronic ones by December 31 face this degradation from January 3.
The companies are Azadi Printers, Bangladesh Hotels, Bangladesh Plantation, Bangladesh Services, Eastern Lubricants Blenders, The Engineers, Fine Foods, Gemini Sea Food, Hill Plantation, Himadri, Jute Spinners, Kohinoor Chemical Company (Bangladesh) , Libra Infusions, Monno Ceramic Industries, Monno Jutex Industries, Monno Jute Stafllers, National Tea Company, Orion Infusion, Pharma Aids, Prime Textile Spinning Mills, Renwick Jajneswar & Company (Bangladesh) , Saiham Textile Mills, Sinobangla Industries and SonaliAansh Industries.
Earlier in July this year, the Securities and Exchange Commission announced that paper share will not be allowed for trading under 'A' category from January next, as paper shares create problems in settling those in an electronic trading system.
14 Dec 2009
Bourses term govt decisions on IPO, MF anti-market
Both the local bourses termed some recent government decisions relating to IPO and mutual funds 'anti-market' saying that it would discourage the new companies aiming to list with the stock exchanges.
At a meeting on November 5 last the finance ministry took decisions that a public limited company must offload shares accounting for minimum 40 per cent of its paid-up capital through initial public offering (IPO) and the securities regulator allow more mutual funds in the market in phases.
"The decisions are anti-market," said Rakibur Rahman, president of the Dhaka Stock Exchange, at a press conference after a joint meeting of the DSE and the Chittagong Stock Exchange (CSE) on the day.
"We don't agree with your decisions, which will just discourage other companies planning to list with the bourses and lead to depletion of the supply of fresh shares into the market, when the demand for new issues is rising day by day," Mr Rahman said.
"The stock market is very sensitive," he said adding that the decision should have been taken in consultation with the stakeholders for betterment of the market.
The decision relating to IPO floatation also contradicts the book-building method, that says a company will go public with shares equivalent to 10 per cent of its paid-up capital, or Tk 300 million, whichever is higher, he said.
"Let the book-building method take its own course. Please, don't disturb the regulations," he said.
He recommended that a public limited company having a paid-up capital below Tk 5.0 billion offload minimum 25 per cent shares and a company with paid-up capital above Tk 5.0 billion offload 15 per cent shares.
"There should be pre-IPO placement. Imposition of the lock-in period might be one year," he said.
"Grameenphone offered only 10 per cent of its paid-up capital through its IPO. If it offered shares accounting for 40 per cent of its paid-up capital, the IPO might have been under-subscribed. So, a market always requires a gap between the demand and the supply for execution of buying and selling," he added.
On uniform face value and market lot, the DSE president said, "We are not against this decision, but it should be decided after sitting with the Securities and Exchange Commission (SEC), the DSE and the CSE."
He was also critical of the slow SEC process of giving approval to mutual funds.
The finance ministry advised the SEC to allow mutual funds in the market in phases to see the impact of their entry into the market.
"We are seriously against it as mutual funds managed by professionals help stabilise the market," the DSE boss said.
But the mutual fund rules say the SEC will have to give the nod for registration of a mutual fund within 30 days, he pointed out.
About Direct Listing Regulations, he said the joint committee of the bourses would discuss the issue further.
However, the DSE and CSE hailed the finance ministry decision on setting up a separate bench for quick disposal of the cases remaining pending with the High Court for years.
"Amendment to some securities rules to bolster the market and make it vibrant is a time-befitting decision," said the DSE president.
CSE President Fakhruddin Ali Ahmed, DSE senior vice president Saiful Islam and other high officials of the bourses were present at the press conference.
At a meeting on November 5 last the finance ministry took decisions that a public limited company must offload shares accounting for minimum 40 per cent of its paid-up capital through initial public offering (IPO) and the securities regulator allow more mutual funds in the market in phases.
"The decisions are anti-market," said Rakibur Rahman, president of the Dhaka Stock Exchange, at a press conference after a joint meeting of the DSE and the Chittagong Stock Exchange (CSE) on the day.
"We don't agree with your decisions, which will just discourage other companies planning to list with the bourses and lead to depletion of the supply of fresh shares into the market, when the demand for new issues is rising day by day," Mr Rahman said.
"The stock market is very sensitive," he said adding that the decision should have been taken in consultation with the stakeholders for betterment of the market.
The decision relating to IPO floatation also contradicts the book-building method, that says a company will go public with shares equivalent to 10 per cent of its paid-up capital, or Tk 300 million, whichever is higher, he said.
"Let the book-building method take its own course. Please, don't disturb the regulations," he said.
He recommended that a public limited company having a paid-up capital below Tk 5.0 billion offload minimum 25 per cent shares and a company with paid-up capital above Tk 5.0 billion offload 15 per cent shares.
"There should be pre-IPO placement. Imposition of the lock-in period might be one year," he said.
"Grameenphone offered only 10 per cent of its paid-up capital through its IPO. If it offered shares accounting for 40 per cent of its paid-up capital, the IPO might have been under-subscribed. So, a market always requires a gap between the demand and the supply for execution of buying and selling," he added.
On uniform face value and market lot, the DSE president said, "We are not against this decision, but it should be decided after sitting with the Securities and Exchange Commission (SEC), the DSE and the CSE."
He was also critical of the slow SEC process of giving approval to mutual funds.
The finance ministry advised the SEC to allow mutual funds in the market in phases to see the impact of their entry into the market.
"We are seriously against it as mutual funds managed by professionals help stabilise the market," the DSE boss said.
But the mutual fund rules say the SEC will have to give the nod for registration of a mutual fund within 30 days, he pointed out.
About Direct Listing Regulations, he said the joint committee of the bourses would discuss the issue further.
However, the DSE and CSE hailed the finance ministry decision on setting up a separate bench for quick disposal of the cases remaining pending with the High Court for years.
"Amendment to some securities rules to bolster the market and make it vibrant is a time-befitting decision," said the DSE president.
CSE President Fakhruddin Ali Ahmed, DSE senior vice president Saiful Islam and other high officials of the bourses were present at the press conference.
9 Dec 2009
No Margin loan to Companys With high P/E
SEC vide its directive no. SEC/CMRRCD/2001- 43/04 dated December 09, 2009 has directed the Merchant Bankers, including the Portfolio Managers to immediately stop providing or disbursing of any further margin loan or credit facilities to their clients to purchase the equity securities with price-earning ratio of above 75 (seventy five) until further order. This Directive shall supersede the previous Directive no. SEC/CMRRCD/2001- 43/198 dated October 21, 2009. This shall have immediate effect.
11 Nov 2009
Gp
Grameenphone Ltd.: As per decision of the Board of Directors of DSE, trading of the shares of Grameenphone Ltd. will start on November 16, 2009 under 'N' category. DSE Trading Code for Grameenphone Ltd. is "GP" and DSE company code # 27001.
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