A stock investor having account with negative equity will be able to participate in trading in next six months from today, which is expected to boost turnover in the stock market.
Bangladesh Securities and Exchange Commission (BSEC) in a letter yesterday wrote to the stock exchanges to allow transactions in the accounts having negative equity from today to June 30 this year.
Analysts termed the move “artificial” that would jack up the market temporarily, but would not be sustainable in the long run.
Equity accounts of the investors who suffered following the market debacle in late 2010 went into negative as their share value falls below their outstanding balance on the loan used to purchase equities. Negative equity is calculated by taking the value of the assets less the balance on the outstanding loan.
According to an unofficial estimate, around Tk14,000 crore is estimated to have got stuck and become non-performing because the borrowers do not have the capacity to repay.
A market expert asking not to be named said the accounts are already bankrupt and the move will bring no sustainable result for the market in the long run.
“It will also encourage speculative trading instead of promoting investment culture.”
In another development, BSEC in its commission meeting yesterday gave in to stockbrokers demand in allowing netting facility in same script.
The commission has approved stock exchanges’ proposal on financial adjustment facilities for same securities on the same trading day and only shares under A, B, G and N categories are eligible for netting, said the BSEC in a statement. On Monday last, Dhaka Stock Exchange put forward the proposal arguing that the netting facility will boost turnover that continued to fall since launching new automated trading system.
The securities regulator suspended netting facility around four years back. Netting facility means settlement of mutual obligations between the two parties or with a third-party acting as a clearing house where the net difference is carried forward.
The BSEC has also extended the period for keeping provision against losses by stockbrokers, stock-dealers and merchant bankers up to 2015, which expired yesterday.
Now stockbrokers, stock-dealers and merchant bankers will be able to keep 20% provision against their un-realised losses in five installments.
