Investors burn as stocks crash | The Daily Star
12:00 AM, December 09, 2010 / LAST MODIFIED: 12:00 AM, December 09, 2010

Investors burn as stocks crash

DSE sheds 6pc before regaining all but 1.5pc


Angry investors take to the streets in front of Dhaka Stock Exchange building, as the market suffered a historic 547 points fall within less than one and a half hours of trading yesterday.
Photo: STAR

Hundreds of angry investors took to the streets in the bustling financial district of Motijheel yesterday to protest an unprecedented 547-point crash in the premier bourse within an hour and a half of the start of trading.
Aggrieved investors set fire to wood and paper in front of Dhaka Stock Exchange (DSE) building, vandalised two private cars, and chanted slogans against top bosses of the bourse and the market regulator.
Baton-wielding riot police charged morning demonstrators, who brought traffic around the bourse area to a standstill for two hours. Investors in other cities including Chittagong, Sylhet, Barisal and Tangail, also protested the crash in share prices.
The market recovered 75 percent of the loss in the afternoon, after the regulator reversed the moves which investors blamed for the crash.
Market insiders blamed the historic fall on the market regulator's directive, which squeezed "netting facilities", and stopped them from buying new shares with funds from another share sale that was ordered but not finalised.
Surprisingly, the directive was issued without the consent of the chairman of the Securities and Exchange Commission (SEC). The regulator served a show-cause notice to Mansur Alam, member of the commission, who told the SEC surveillance department to issue the directive on Tuesday.
Investors are now used to buying shares, using netting, before completing share sales, and expect to adjust the sale value to the market price any time of a single day's trading.
"The directive was on the proper execution of existing rules on netting facilities," claimed Alam.
"It was nothing new. I thought there was no need to take prior permission from the chairman, and it would be okay if I informed him later."
Aggrieved investors and market insiders alleged that the directive was profiteering sabotage. They suspect government high officials and big market players might have a hand in the directive.
One angry investor said: "The big fish knew very well that the directive would take the market down, and they could cash in on the consequent volatility."
Another directive on Monday also stung the market this week. The rule on executing buy orders only after cashing an investor's cheque contributed to a 332-point loss in the prior two days.
Md Zahurul Alam, chief operating officer of the Dhaka bourse, said: "We talked to some of the angry investors, and it seems that the SEC's two directives cast negative repercussion on the market."
Yesterday's protests and market crash -- greater even than 1996 crash -- prompted the SEC to postpone both directives; one at 12:26pm and another at 1:01pm.
Once the news was posted on the trading servers, the market recovered most of its losses from the first half of the trading. At the close of trading, the benchmark DSE General Index closed only 134 points lower, at 8,451.
"It's an unprecedented and untoward incident," said Ziaul Haque Khondker, chairman of the SEC, who vowed to look into the matter.
"It is natural that there will be ups and downs in the market. But we, as the regulator, never want a drastic intra-day fall in the market."
A big correction in share prices was widely predicted last year, as analysts warned many times that the soaring market was dangerously overheated.
The "bull run" lured thousands of fresh investors with crores of taka in hands into the market, increasing the demand for shares and making the stocks overvalued.
The government last month directed dozens of state-owned companies to offload their shares in the stock market in a bid to create new supply; yet most have yet to come into the market.

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