FE Report (October 5, 2010)
Small investors, who dominate more than one-third of the daily trade at the country's prime bourse Dhaka Stock Exchange (DSE), feel that the present market is too risky to invest in but its continued bullish trend attracts them towards the market.
The liquidity-driven share market has been experiencing buoyant mood over the last two years, raising a volley of questions among the people about its direction.
The only remedy for minimising the risk is to increase supply of shares as the market is hungry for them, they viewed.
Their observations came up as The Financial Express was interviewing small investors, most of them being retired public service holders, students, unemployed youths and housewives.
The Dhaka Stock Exchange (DSE) was on a bull run for about two years as its main index DGEN increased from 2800 points in 2009 to 7200 points as of yesterday (October 4), showing an increase of 157 per cent.
Many like Mohammad Qayyum, a 59-year-old retired banker who is doing stock business for one and half years, said, "The present market trend is very risky to invest."
"It is the higher return that prompts me to come to the market," he said.
Zillur Rahman, an investor who has been in the market over the last 10 years, said, "I can earn 20-25 per cent profit by investing in stocks, which discourages me to deposit money for savings in the banks."
According to Bangladesh Bank, deposit interest rate of all scheduled banks came down to 6.12 per cent in March 2010 from 6.35 per cent in December 2009.
Rahman, who depends on stock market to run his family, said, "No market in the world is without manipulators and rumours. But the presence of manipulators and rumours in our stock market is much higher than any other market," he said.
He said, "Mismatch between demand and supply mainly creates huge opportunities for the manipulators, I believe."
Mr. Ajoy, who usually invests after watching the market trend, said, "I can tell good stocks from bad stocks. But this theory makes me earn less profit and takes longer time to get returns."
He is also aware that the market is getting riskier but added, "I notice some people make money by investing in overvalued stocks. Why shall I keep myself away, then?"
"To me, there are no other sectors in Bangladesh, where good returns are ensured," he said riveting his eyes on the electronic board that shows the price movement of the shares. "I think some take stock of the regulatory steps that create opportunities for them," he added.
Some investors said securities regulator's intervention is needed to bring discipline to the market but some say the regulator's frequent intervention destabilises the market.
The Securities and Exchange Commission (SEC) has been struggling to put a brake on the bullish market by taking credit tightening measures at least seven to eight times in the last one year, but it proved abortive.
Another retired public service holder, asking not to be named, said fundamentally based investment does not bring quick profit as manipulators fail to play the game with those stocks. "But experience says that the capital market is only for the manipulators," he said.
He, basically, comes to the market only to pass his leisure time.
Abul Hashem, a graduate from a public university, comes to the market after finding no job.
"I believe 'Z' category shares are not good. The present market trend is very risky and I am not pleased at the regulator's and the bourse's present roles, as they frequently change their decision," he said.
Faysal Farazi, who entered the market one year back and claims to be an analytical investor, said, "I try to buy shares considering the companies' earning per share (EPS) and net asset value (NAV)."
"I make profit lower than those investors who are making windfall profit by investing in speculative stocks. But sometimes they burn their fingers," he added.
Abu Zawad, a third year student of a private university, said, "I was interested in stock market after noticing that my friends and others make money by investing in stocks."
"The present market trend is too risky for us. The SEC should identify the manipulators who influence share price movement," he said.
Nitun Kundo, who has been in the market since 1992, said, "I came to the market as I had no intention to do an office job."
"Investors are being deprived of having good dividends due to the companies' malpractice," he said adding that the market is getting riskier.
"At the companies' annual general meeting (AGM), the general investors are not allowed to speak. This is bad practice," he said.
Sabbir Ahmed, a student of Dhaka College and a new comer, said, "As I have no idea about the market and the company's fundamentals, I only follow my friend who is experienced in stock business. "
Lutfunnahar, a housewife, said, " I have no idea about the market. But I was inspired to invest in the market on suggestion from one of my friends. I do not know what fate is awaiting me in the market."
A mobile hand set trader Ujjal Haque said, "I came to the market following others who have made huge profits. But I have no idea about the market."
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.
"In a bullish market, people invest relatively irrationally. Every investor thinks they can win. But many will end up losing. But that is their risk and their choice," said Salahuddin Ahmed Khan, professor of finance at Dhaka University.
"It is a liquidity-driven rally. But what worries me is the way it is going, we might not see a pause. People should be concerned about their risks," said Khan, also the ex-chief executive officer of the DSE.
Robust fund inflows drove the DSE onto a spiral. The daily average turnover clocked at Tk 24.26 billion, an increase of 380 per cent from Tk 5.0 billion in 2009.
Meanwhile, two former SEC chairmen Monday raised the alarm about the overheated stock market and urged the investors to exercise caution.
They also wanted the government to put in place actions to cool down the market for the greater interest of the investors.
Their comment came in the backdrop of the failure of the securities regulator to rein in the market through a number of measures.
"What can I say if the investors let their fingers burn? How is it possible to protect the people who are willing to burn their own fingers?" the former SEC Chairman and former advisor to the caretaker administration Dr. Mirza Azizul Islam told the FE.
"The present market situation is a matter of great concern", Islam said.
He advised the investors not to invest more than one third of their capital in stock market.
"The remaining two-third of their capital can be invested in real sectors and fixed income deposits," he added.
Another former SEC Chairman and ex-secretary Farukh Ahmed Siddiquee said the market is already beyond any comment and it is high time the government took appropriate measures to rein the market for the interest of all concerned.
"The new investors attracted by an overheated market might be more vulnerable. If the bubble busts, it is the small investors who would bear the main brunt," he said.
"The more the market goes up the more the risk factors will be," he said.
"So the government must be careful about the booming market," he added.
The liquidity-driven share market has been experiencing buoyant mood over the last two years, raising a volley of questions among the people about its direction.
The only remedy for minimising the risk is to increase supply of shares as the market is hungry for them, they viewed.
Their observations came up as The Financial Express was interviewing small investors, most of them being retired public service holders, students, unemployed youths and housewives.
The Dhaka Stock Exchange (DSE) was on a bull run for about two years as its main index DGEN increased from 2800 points in 2009 to 7200 points as of yesterday (October 4), showing an increase of 157 per cent.
Many like Mohammad Qayyum, a 59-year-old retired banker who is doing stock business for one and half years, said, "The present market trend is very risky to invest."
"It is the higher return that prompts me to come to the market," he said.
Zillur Rahman, an investor who has been in the market over the last 10 years, said, "I can earn 20-25 per cent profit by investing in stocks, which discourages me to deposit money for savings in the banks."
According to Bangladesh Bank, deposit interest rate of all scheduled banks came down to 6.12 per cent in March 2010 from 6.35 per cent in December 2009.
Rahman, who depends on stock market to run his family, said, "No market in the world is without manipulators and rumours. But the presence of manipulators and rumours in our stock market is much higher than any other market," he said.
He said, "Mismatch between demand and supply mainly creates huge opportunities for the manipulators, I believe."
Mr. Ajoy, who usually invests after watching the market trend, said, "I can tell good stocks from bad stocks. But this theory makes me earn less profit and takes longer time to get returns."
He is also aware that the market is getting riskier but added, "I notice some people make money by investing in overvalued stocks. Why shall I keep myself away, then?"
"To me, there are no other sectors in Bangladesh, where good returns are ensured," he said riveting his eyes on the electronic board that shows the price movement of the shares. "I think some take stock of the regulatory steps that create opportunities for them," he added.
Some investors said securities regulator's intervention is needed to bring discipline to the market but some say the regulator's frequent intervention destabilises the market.
The Securities and Exchange Commission (SEC) has been struggling to put a brake on the bullish market by taking credit tightening measures at least seven to eight times in the last one year, but it proved abortive.
Another retired public service holder, asking not to be named, said fundamentally based investment does not bring quick profit as manipulators fail to play the game with those stocks. "But experience says that the capital market is only for the manipulators," he said.
He, basically, comes to the market only to pass his leisure time.
Abul Hashem, a graduate from a public university, comes to the market after finding no job.
"I believe 'Z' category shares are not good. The present market trend is very risky and I am not pleased at the regulator's and the bourse's present roles, as they frequently change their decision," he said.
Faysal Farazi, who entered the market one year back and claims to be an analytical investor, said, "I try to buy shares considering the companies' earning per share (EPS) and net asset value (NAV)."
"I make profit lower than those investors who are making windfall profit by investing in speculative stocks. But sometimes they burn their fingers," he added.
Abu Zawad, a third year student of a private university, said, "I was interested in stock market after noticing that my friends and others make money by investing in stocks."
"The present market trend is too risky for us. The SEC should identify the manipulators who influence share price movement," he said.
Nitun Kundo, who has been in the market since 1992, said, "I came to the market as I had no intention to do an office job."
"Investors are being deprived of having good dividends due to the companies' malpractice," he said adding that the market is getting riskier.
"At the companies' annual general meeting (AGM), the general investors are not allowed to speak. This is bad practice," he said.
Sabbir Ahmed, a student of Dhaka College and a new comer, said, "As I have no idea about the market and the company's fundamentals, I only follow my friend who is experienced in stock business. "
Lutfunnahar, a housewife, said, " I have no idea about the market. But I was inspired to invest in the market on suggestion from one of my friends. I do not know what fate is awaiting me in the market."
A mobile hand set trader Ujjal Haque said, "I came to the market following others who have made huge profits. But I have no idea about the market."
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.
"In a bullish market, people invest relatively irrationally. Every investor thinks they can win. But many will end up losing. But that is their risk and their choice," said Salahuddin Ahmed Khan, professor of finance at Dhaka University.
"It is a liquidity-driven rally. But what worries me is the way it is going, we might not see a pause. People should be concerned about their risks," said Khan, also the ex-chief executive officer of the DSE.
Robust fund inflows drove the DSE onto a spiral. The daily average turnover clocked at Tk 24.26 billion, an increase of 380 per cent from Tk 5.0 billion in 2009.
Meanwhile, two former SEC chairmen Monday raised the alarm about the overheated stock market and urged the investors to exercise caution.
They also wanted the government to put in place actions to cool down the market for the greater interest of the investors.
Their comment came in the backdrop of the failure of the securities regulator to rein in the market through a number of measures.
"What can I say if the investors let their fingers burn? How is it possible to protect the people who are willing to burn their own fingers?" the former SEC Chairman and former advisor to the caretaker administration Dr. Mirza Azizul Islam told the FE.
"The present market situation is a matter of great concern", Islam said.
He advised the investors not to invest more than one third of their capital in stock market.
"The remaining two-third of their capital can be invested in real sectors and fixed income deposits," he added.
Another former SEC Chairman and ex-secretary Farukh Ahmed Siddiquee said the market is already beyond any comment and it is high time the government took appropriate measures to rein the market for the interest of all concerned.
"The new investors attracted by an overheated market might be more vulnerable. If the bubble busts, it is the small investors who would bear the main brunt," he said.
"The more the market goes up the more the risk factors will be," he said.
"So the government must be careful about the booming market," he added.
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