Margin loan ratio may go up
The stock market regulator has decided in principle to increase the margin loan ratio in a bid to enhance the loan giving capacity of merchant banks.
The move is expected to bring back stability and confidence into the market from a consecutive five-week slump.
The Securities and Exchange Commission (SEC) will re-fix the margin loan ratio in its next meeting, as the decision needs to be approved by the meeting, SEC Executive Director Farhad Ahmed said.
“The commission actively considers increasing the loan ratio,” he said while addressing a press briefing following a meeting with merchant bankers in the commission's boardroom yesterday.
The margin loan is the credit provided by merchant banks against securities held by investors. Presently, merchant banks are allowed to provide loans at 1:1 ratio, meaning an investor will get Tk 1 against his/her holding securities worth Tk 1.
The SEC is also considering relaxing the conditions for merchant banking wings of non-banking financial institutions (NBFIs) for giving loans to the investors, Ahmed said.
At present, the NBFIs are not allowed to provide loans more than five times of their paid-up capital.
The SEC sat with the merchant bankers yesterday for the second time in two weeks to find out why the market was going down continuously during the last five weeks, when there is no logical ground behind the persistent bearish trend in the market.
On the allegation against the merchant banks, which had reportedly compelled their clients to sell off shares to adjust loans, the SEC executive director said the commission has found the allegation partially true.
“And the commission will not support any attempt to destabilise the market with forced sell-off,” he said.
The SEC will also look into the forced sell-offs by the reported merchant banks, he said.
The capital market regulator has also decided to issue merchant banking licences to new firms to increase the number of active merchant banks in the stock market.
Although as many as 28 merchant banks are now licensed, only some 10 that are active in such banking allegedly dominate the market off and on.
However the Dhaka stocks closed marginally higher yesterday with the benchmark index, DSE General Index, rising 5.36 points, or 0.2 percent, to 2,621.94 points. The DSE All Share Price Index also slightly gained 3.71 points, or 0.17 percent, to 2,175.97 points.
Majority of the securities were traded up on the Dhaka Stock Exchange. Of the 224 traded issues, 131 advanced, 86 declined and seven remained unchanged. A total of 1,29,76,755 shares worth Tk 160.03 crore changed hands on the premier bourse.
Chittagong stocks also rose slightly. The CSE Selective Categories Index increased 9.53 points, or 0.18 percent, to 5,235.77 points, while the CSE All Share Price Index gained 12.22 points, or 0.15 percent, to 8,074.24 points.
A total of 35,29,497 shares worth Tk 30.67 crore changed hands on the port city bourse. Of the 128 traded issues, 62 advanced, 60 declined and six remained unchanged.
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