LOCAL English dailies reported that stock market regulator Bangladesh Securities and Exchange Commission (BSEC) has found that margin loan facilities which was initially allowed to pump fund to the stocks after 2010-11 market crash is playing a key role in abnormal rise in share prices of the newly listed companies in the bourse. The report said the Commission might review the facility now in a bid to preventing abnormal rise in those companies’ share prices; which have the risk of drastic fall again. In fact margin loans were allowed in the stocks for use by merchant banks to pump additional fund to the market immediately after the crash but situation has now changed that also deserves a review of the facility and its drastic monitoring,
The report has ruled out that the facility may be stopped immediately; but market behaviours of some newly listed companies have also made the monitoring quite essential. Quoting share prices of IFAD Autos which rose by 125.67 percent or to Tk 37.70 on Thursday, the first day of its trading at Dhaka Stock Exchange, the report said such abnormality is causing concerns to the regulator. The company’s share price rose phenomenally on the first day, but its first quarterly profit for July-September period fell sharply at the same time. Its profit also fell from Tk 10,21 crore to Tk 5.49 crore over the same time of the previous year. Some other newly listed companies also recorded similar fell in income and profit while their share prices were on sharp rise. There is a common perception that market manipulators are at work to betray ordinary investors by pushing share prices up and then abandoning them with shares at lower prices.
We believe that the BSEC measure is a right step at the right time to reign in the wrong-doers, because the stock market is the most vulnerable place where ordinary investors are very often cheated by big swindlers. Our past experiences showed that speculators have always betrayed small investors in the bourse by pushing share prices phenomenally up working as a syndicate and then moving out of the market making cash of their stocks. It is strange when IFAD Auto’s share prices were sharply rising; its profit was on drastic decline. How could it then justify the phenomenal rise in its share price, except that some syndicate was having its hand behind it.
We welcome the BSEC move and ask the authorities to go for reviewing every such monetary and financial transaction and loan facility so that newly listed companies can’t betray investors. Nobody should also be allowed to make the investors fool with inflated financial prospectus to go to the bourse.
