FE Report (October 10, 2010)
The country's two stock exchanges Saturday rang the warning bell saying the market was getting overpriced every day, which might erode the people's investment and dent its future growth as well.
They urged the government to take emergency steps for offloading state-owned enterprises (SoEs) within a month to save the market and to appease the investors' strong appetite for shares.
The liquidity-driven share market has been experiencing bull-run over the last two years, prompting the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) to alert the investors.
"We are worried about the market's crazy behaviour," said Shakil Rizvi, president of DSE, in a joint press conference at a city hotel.
He said: "We are warning you that it's very risky right now. Stock market collapse is not far off. Investors, be careful!"
The DSE was on a bull run for about two years as its main index DGEN increased from 2800 points in 2009 to 7400 points, showing an unprecedented increase of 164 per cent.
Echoing the DSE president, Fakhor Uddin Ali Ahmed, president of CSE, said: "Unfortunately, investors are showing interest in stocks without strong fundamentals for quick gain, thus, making their investment risky."
"The market might collapse at any time, hurting the latecomers most. So, it's not right time to invest," he said.
He also said: "Please, don't invest in risky scrips. Don't give ear to rumour. Ultimately, you will have to bear the brunt."
Robust fund inflows drove the DSE onto a spiral. The daily average turnover soared to Tk 28.26 billion, an increase of 465 per cent from Tk 5.0 billion in 2009.
The number of investors has increased significantly as the beneficiary owner's (BO) account stood at 2.92 million as of October 4, up by 38 per cent from 2.12 million recorded in June, 2009.
Both the bourses came down heavily on the government for not offloading shares of 26 SoEs even after announcement made around three years ago.
"There is no time to wait. It is already too late," Rizvi said calling upon the government to take urgent measures to offload 49 per cent shares of SoEs to help stabilise the market.
He regretted that no big companies were listed with the stock exchanges this year, igniting the fear of share short supply.
Only 13 companies went public in the current year so far against 18 companies hitting the market in 2009, according to statistics of the Securities and Exchange Commission (SEC).
To increase the share supply, the DSE boss also requested the regulator to allow more companies, which already submitted applications for IPOs, to hit the market.
"But it should keep in mind that some financially weak companies, as happened in 1996, taking advantage of the situation were allowed to float shares. Some of them later proved to be junk shares now," he said.
"The bond market needs to be activated for creating more options before the investors so that they can switch over from equity market to bond market to minimise the risk," he added.
The CSE president said: "Scanty supply of shares are behind the reason for making the market overvalued. Immediate share supply is needed to satiate the investors' appetite."
"The government should bear the responsibility if the market collapses," he said requesting the government to raise funds to finance the big infrastructures, tourism and power projects, which will help stabilise the market.
He was critical of the private entrepreneurs for not raising fund from the market for expansion of their companies taking advantage of tax incentive. "They are afraid of financial disclosures and transparency," he added.
On over the counter (OTC) market -- a separate trading floor provided by a stock exchange to facilitate trading of unlisted and de-listed companies -- he said: "We have failed to attract the investors in the OTC market as the existing system is not trading worthy. It needs to be revamped."
The CSE president extended all out support to the SEC on behalf of the bourses, saying no challenge should affect the regulator's moves, taken for the sake of the capital market.
"The stock regulator is a must for proper market monitoring and ensuring the interest of the investors. Some decisions of the SEC might seem unrealistic for the time being, but we have to keep it in mind that its decisions are taken for the sake of the market," the CSE president said.
"We are always by the side of the SEC, and we think that the regulator should not be challenged while carrying out its responsibilities. The SEC, DSE and CSE should trust one another and work together for the greater interest of the capital market," he said.
The CSE president said there is a shortage of manpower in the SEC, and the government should immediately fulfill the vacancies for ensuring smooth operation of the regulator.
He also raised questions about the role of some issue managers who bring companies with 'poor fundamentals' to the stock market.
"The SEC should take firm action against those issue managers who bring issues with poor fundamentals to the market even by increasing their price through manipulation," the CSE president said.
"On the other hand, the issue managers who bring companies with good fundamentals should be rewarded," he said.
The CSE president also said the illegal business, which is being carried out by some vested quarters in the name of private placement, must be prevented.
Echoing the CSE president, DSE President Shakil Rizvi said they do not support any proposal to reduce the lock-in period of the private placement shares for the interest of the market.
The country's two stock exchanges Saturday rang the warning bell saying the market was getting overpriced every day, which might erode the people's investment and dent its future growth as well.
They urged the government to take emergency steps for offloading state-owned enterprises (SoEs) within a month to save the market and to appease the investors' strong appetite for shares.
The liquidity-driven share market has been experiencing bull-run over the last two years, prompting the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) to alert the investors.
"We are worried about the market's crazy behaviour," said Shakil Rizvi, president of DSE, in a joint press conference at a city hotel.
He said: "We are warning you that it's very risky right now. Stock market collapse is not far off. Investors, be careful!"
The DSE was on a bull run for about two years as its main index DGEN increased from 2800 points in 2009 to 7400 points, showing an unprecedented increase of 164 per cent.
Echoing the DSE president, Fakhor Uddin Ali Ahmed, president of CSE, said: "Unfortunately, investors are showing interest in stocks without strong fundamentals for quick gain, thus, making their investment risky."
"The market might collapse at any time, hurting the latecomers most. So, it's not right time to invest," he said.
He also said: "Please, don't invest in risky scrips. Don't give ear to rumour. Ultimately, you will have to bear the brunt."
Robust fund inflows drove the DSE onto a spiral. The daily average turnover soared to Tk 28.26 billion, an increase of 465 per cent from Tk 5.0 billion in 2009.
The number of investors has increased significantly as the beneficiary owner's (BO) account stood at 2.92 million as of October 4, up by 38 per cent from 2.12 million recorded in June, 2009.
Both the bourses came down heavily on the government for not offloading shares of 26 SoEs even after announcement made around three years ago.
"There is no time to wait. It is already too late," Rizvi said calling upon the government to take urgent measures to offload 49 per cent shares of SoEs to help stabilise the market.
He regretted that no big companies were listed with the stock exchanges this year, igniting the fear of share short supply.
Only 13 companies went public in the current year so far against 18 companies hitting the market in 2009, according to statistics of the Securities and Exchange Commission (SEC).
To increase the share supply, the DSE boss also requested the regulator to allow more companies, which already submitted applications for IPOs, to hit the market.
"But it should keep in mind that some financially weak companies, as happened in 1996, taking advantage of the situation were allowed to float shares. Some of them later proved to be junk shares now," he said.
"The bond market needs to be activated for creating more options before the investors so that they can switch over from equity market to bond market to minimise the risk," he added.
The CSE president said: "Scanty supply of shares are behind the reason for making the market overvalued. Immediate share supply is needed to satiate the investors' appetite."
"The government should bear the responsibility if the market collapses," he said requesting the government to raise funds to finance the big infrastructures, tourism and power projects, which will help stabilise the market.
He was critical of the private entrepreneurs for not raising fund from the market for expansion of their companies taking advantage of tax incentive. "They are afraid of financial disclosures and transparency," he added.
On over the counter (OTC) market -- a separate trading floor provided by a stock exchange to facilitate trading of unlisted and de-listed companies -- he said: "We have failed to attract the investors in the OTC market as the existing system is not trading worthy. It needs to be revamped."
The CSE president extended all out support to the SEC on behalf of the bourses, saying no challenge should affect the regulator's moves, taken for the sake of the capital market.
"The stock regulator is a must for proper market monitoring and ensuring the interest of the investors. Some decisions of the SEC might seem unrealistic for the time being, but we have to keep it in mind that its decisions are taken for the sake of the market," the CSE president said.
"We are always by the side of the SEC, and we think that the regulator should not be challenged while carrying out its responsibilities. The SEC, DSE and CSE should trust one another and work together for the greater interest of the capital market," he said.
The CSE president said there is a shortage of manpower in the SEC, and the government should immediately fulfill the vacancies for ensuring smooth operation of the regulator.
He also raised questions about the role of some issue managers who bring companies with 'poor fundamentals' to the stock market.
"The SEC should take firm action against those issue managers who bring issues with poor fundamentals to the market even by increasing their price through manipulation," the CSE president said.
"On the other hand, the issue managers who bring companies with good fundamentals should be rewarded," he said.
The CSE president also said the illegal business, which is being carried out by some vested quarters in the name of private placement, must be prevented.
Echoing the CSE president, DSE President Shakil Rizvi said they do not support any proposal to reduce the lock-in period of the private placement shares for the interest of the market.
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