The benchmark index and turnover of the capital bourse took a leap in the last three days thanks to the finance minister's move to defibrillate the market.
On June 18, the minister sent a letter to the Bangladesh Bank governor asking him to redefine the banks' capital market exposure and increase the investment capacity of the Investment Corporation of Bangladesh, both longstanding demands of stakeholders.
“Despite asking you twice you did not take any initiative,” Finance Minister AMA Muhith said in the letter to BB Governor Fazle Kabir.
Since no initiative was taken, the market remained bearish and almost 1,000 points were knocked off in the last 5-6 months, the letter added.
When determining capital market exposure, banks can leave out their subsidiaries' investment in the stock market, as per Muhith's instruction to the BB governor.
He instructed excluding non-listed securities and non-listed strategic investment in exposure calculation and considering the cost price rather than the market price of securities in calculations.
The minister also allowed banks to only include the portion of the loans made to subsidiaries that was used for share purchase as capital market exposure.
ICB will no longer be considered a single party borrower. Banks' single borrower exposure limit is 15 percent of their total paid-up capital, and some lent as much or more to the ICB alone.
The banks' serial withdrawal has pushed the ICB in a tight corner: its ability to invest in the market has seriously been curtailed, and it had to go on a selling spree to retrieve the funds to return to banks, Muhith said in the letter.
The BB declined to comment on the matter.
The letter has sent investor confidence in the market soaring.
DSEX, the benchmark index of the premier bourse, rose 56.88 points, or 1.05 percent, finishing the day at 5,441.75.
In the last three days, DSEX rose 100.46 points.
Earlier this month, DSEX declined to its one-and-a-half-year low of 5,313.70 points, wiping out Tk 44,506 crore of value.
Investors reacted positively to the news that the private banks will be bringing down their interest rates to single digit from July 1, said EBL Securities.
The Bangladesh Association of Bankers (BAB) has decided to reduce the interest rate to single digit from the next month.
Turnover, another important indicator of the market, also jumped 26.92 percent to Tk 858.74 crore.
Some 17.12 crore shares and mutual fund units changed hands on the DSE. Of the traded issues, 188 advanced and 110 declined, while 42 closed unchanged on the premier bourse.
Grameenphone dominated the turnover chart with its transaction of 12.35 lakh shares worth Tk 49.10 crore, followed by Alif Industries, Khulna Power, Paramount Textile and United Power Generation.
GQ Ball Pen was the day's best performer with a 9.98 percent gain, followed by Prime Textile, Queen South Textile, Paramount Textile and Atlas Bangladesh.
Janata Insurance was the worst loser, shedding 9.27 percent, followed by Meghna Pet Industries, Republic Insurance, Samata Leather and Meghna Condensed Milk.
Chittagong stocks also rose yesterday, with the bourse's benchmark index, CSCX, increasing 113.82 points, or 1.10 percent, to finish the day at 10,156.20.
Gainers beat losers as 148 advanced and 62 declined, while 32 finished unchanged on the Chittagong Stock Exchange.
The port city bourse traded 78.82 lakh shares and mutual fund units worth Tk 40.98 crore in turnover.