Banks pledge big money into stock

Commercial banks yesterday promised to inject fresh funds into the stockmarket.
"The banks have agreed to make new investment in the stockmarket in line with the permissible limit set by the central bank," said K Mahmud Sattar, president of the Association of Bankers, Bangladesh (ABB).
The current PE (price-earnings) ratio of the market suggests it is a good time for investment, he said adding, "The banks will start investing in the market from next week."
As the news of assurance from the bankers spread in the stockmarket, share prices saw a big jump. The key index of Dhaka Stock Exchange, DGEN, went up 5.44 percent to 5,544 points. The turnover also jumped around 45 percent to Tk 402 crore.
ABB, the apex body of the country's bankers, sat at an emergency meeting in a hotel in the capital yesterday to decide how to help the struggling market following a call from the central bank governor on the issue.
At the meeting 28 bankers including some state-owned commercial bankers were present.
Presently, the country's banking system has much lower than legally permissible level of involvement in the stockmarket. The banks' investment in the share market stood at around 3 percent of their liabilities on an average in September, although rules allow them to invest up to 10 percent of their liabilities.
The central bank in a statement on Wednesday clarified that the banks are allowed to make investment in the stockmarket up to the permissible limit and timeframe under the banking companies law.
The ABB president said every bank has an investment committee and they will finalise the investment plan in their individual committee's meeting.
"Most banks have invested just 3 percent of their allowable limit," he said. "Only 11 banks have around 10 percent exposure."
Asked whether the banks will give any interest waiver on margin loans, Sattar said it will depend on the combined decision taken by parent companies and their subsidiary firms.
Responding to queries on how much money a bank will inject into the market, Sattar said, "It's a private matter of the banks. They will decide based on their cash flow and strategies."
He thinks the banks will go for long-term portfolio investments, he said.