Banks plan to come back to stockmarket
Private banks that almost went out of the capital market at the end of 2010 have decided to come back as they found the present market is good for investments.
Four such banks have already announced that they would invest Tk 900 crore in next two months. Many banks are in the pipeline to announce their investment plans, bankers said.
“We believe institutional investments would stabilise the ailing market and bring back investors' confidence,” said SA Farooqui, managing director of Standard Bank.
Explaining Standard Bank's announcement to invest Tk 100 crore in two months, Farooqui said, “The market looks very lucrative for investment.”
Like Standard Bank, Pubali, EXIM and NCC have got a green light of their boards to invest Tk 500 crore, Tk 200 crore and Tk 100 crore respectively in two months.
“Other banks are also thinking to make a comeback,” said Farooqui.
The central bank also sees no problem with the banks' plans to invest depositors' money in the speculative market.
“Legally, a bank can invest 10 percent of its deposits in the stockmarket, but most of the banks now have it within 1-3 percent,” said SK Sur Chowdhury, deputy governor of the Bangladesh Bank (BB).
Though Bangladesh's stockmarket is retail-driven, institutions, especially banks, made hefty profits in 2009 and 2010 at the cost of these retail investments. At that time, according to BB reports, many banks invested up to 30 percent of their deposits in the stockmarket violating the law.
A huge flow of banks' money had fuelled the market and everyday transaction reached more than Tk 3,000 crore.
The benchmark DSE General Index soared to 8,918 points on December 5 2010, more than double compared to a year ago.
“Our board has approved Tk 500 crore to invest in the capital market. They are willing to boost the ailing market,” said Helal Ahmed Chowdhury, managing director of Pubali Bank.
Chowdhury said they would invest the money by complying with all regulatory requirements.
However, as listed companies, banks were bound to disclose the information on their investment plans to the SEC and the stock exchanges within 15 minutes of their respective board approvals. But in this case, this regulation was not followed.
The banks' plans about their investments in the stockmarket has already boosted the market as the retail investors think institutional investors have the capacity to bring back confidence in the market.
Investors, however, look cautious if the banks do not invest despite announcements through newspaper advertisements.
But the central bank said the banks cannot backtrack on their plan after making public announcements.
“Regulators -- the Securities and Exchange Commission and the BB -- can catch them (banks) if they don't invest after making the announcements,” said the BB deputy governor.