Stocks gain some grounds in 2014, but investors yet to recover losses

December 31, 2014

The small-scale investors affected by 2010-11 market crash are yet to recover losses although the market recovered some grounds during 2014, experts have said.
The key index of Dhaka Stock Exchange, DSEX, advanced by 13 per cent over the year to finish at 4,865 points on December 30 after beginning the year with 4,286.15 points.Substantial amount of shares were added during the period as 26 companies raised Tk 2,978 crore from the capital market through initial public offerings and rights shares.
As per the DSE statistics, of the 26 companies, 17 raised capital worth Tk 1,980 crore through IPOs, while nine raised Tk 998 crore by offering rights shares during the period.
‘Although the market has increased marginally during the year, recovering small-scale investors’ losses of the 2010-2011 market crash remained mostly unachieved,’ former SEC chairman Faruque Ahmed Siddiqui told New Age on Tuesday.
‘Loss recovering has become almost impossible for the investors who have invested margin loan fund to the capital market during the market bubble in 2009-2010 due to interest burden,’ he said.
Siddiqui, however, said during the year the investors had recovered confidence over the market to some extent as the market behaved comparatively stable than the previous year.
Speaking about the newly-listed companies, he said the capital market was yet to attract many companies with good track.
Although the market performed better in 2014, losses of the investors, who have invested at the market peak, might remained unrecovered,’ former DSE president Shakil Rizvi told New Age.
Fresh investors might have made satisfactory return during the year as some companies’ share prices increased above the 2010 level, he said.
The steady rise of DGEN, the benchmark general index of DSE, from 2,795.33 points in January 2009 to 4,535.53 points in January 2010 had attracted both the institutional and small-scale investors to the securities market.
Sudden investment inflow, mostly from banking sector, had given rise to a boom in 2010 on which the DGEN had skyrocketed by 82.87 per cent to 8,290.41 points, with its peak of 8,918.51 points reached on December 5 in the year with a turnover of Tk 3,249 crore.
Powerful market cartels composed of speculators, brokers, auditors, company-owners, and even officials of regulatory bodies, allegedly had used the huge liquidity flow to generate a price surge that had gone far above the fundamentals of the companies concerned.
In 2009, the BSEC (then SEC) and the BB asked the commercial banks to transform their merchant banking departments into separate legal entities which turned the banks’ investments in their merchant bank wings into loans.
The BB, however, in December 2010 directed the commercial banks to reduce by August 21, 2011 the amount of the credit they had given to single borrowers to within the ceiling of 15 per cent of their paid-up capital.
That had forced the merchant banks to sell off their investors’ shares to ensure that their parent banks could keep their single borrower exposure within the BB-set limit.
All the factors acting together brought down the unsustainable market system in just two months, with the DGEN crash-landing from 8,723.18 points on December 1, 2010 to 7,572.61 points on January 30, 2011, producing the big bang of the crash, the aftershocks of which had since been continuing to decrease the share prices further.
The worst-ever stock crash in the country’s history had wiped out even the initial capital investment made by thousands of investors.
The aftershock of the market crash of late 2010 had continued throughout the following years where DGEN had lost 3,032 points in 2011 and 1,038 points in 2012.
The DGEN hit the lowest ebb on January 4, 2013 at 3,383.23 points since November 15, 2009.
The Dhaka bourse introduced new general index, DSEX, on January 28, 2013 which hit its lowest value at 3,438.90 points on April 30 this year and reached its highest at 4,439.60 points on November 20.
The government in the 2011-2012 took initiatives to waive 50 per cent interest on margin loans for the small-scale investors affected by the stock market crash and introduced a refinance scheme of Tk 900 crore.

-Input from New Age

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