As registration to get listed with the bourses has been simplified, Dhaka Stock Exchange (DSE)'s small and medium enterprises index (DSMEX) has doubled, but investors are anxious about this rather-abnormal rise, given how markets have catapulted and crashed at breakneck speed.
The index was at its lowest on March 10, at 582.87 points.
After an announcement by the Bangladesh Securities and Exchange Commission (BSEC) to ease the registration process on March 28. The index reached 805.98 points on the day, a positive sign.
A week later, it peaked at 1,573.96 points on April 5. Cut to last Thursday, it ended at 1,479 points.
Investors are questioning whether this will continue to rise or remain stable.
However, economists and stock market insiders believe that this trend will continue this week and for a few more weeks to come.
Asked about investing in the SME market, AB Mirza Azizul Islam, economist and former finance adviser to the caretaker government, said that in the past, regulators took steps to increase investor participation in SMEs, but that did not make any major profit. One of the obstacles, in this case, was the registration process.
Not only the investors, but most of the brokerage house authorities also are not aware of this registration process. Besides, many people do not know that the SME market can be traded like the main market. Many do not know that transactions can be done in the main market and SMEs with a BO account. No one even came forward to report it, he added.
As the SME sector is new, qualified investors are still unaware of its advantages and disadvantages, he said: “Although this sector is new, there is a lack of publicity in the stock market, starting from regulators.”
"However, if the same companies had started trading in the main market, they would have traded at several times the face value. While the DSMEX index witnessed a downward trend in the last two days of last week, the previous upward trend may continue for some time to come," the economist added.
In order to be eligible to trade on SMEs in the stock market before the announcement of BSEC on March 28, one had to fill up the online form given on DSE's ESS website and mail it to DSE.
The DSE would then verify and sort it out and approve it. An investor could then trade in that market.
But from now on, qualified investors will not have to register separately. DSE will automatically register if there is an investment of Tk20 lakh in the portfolio, which is the maximum, considering the purchase price or market price.
Earlier, it was Tk50 lakh.
As an outcome of this facility, market insiders and investors think that the index is rising in SME platforms.
Akhter Hossain, an investor who has been in the market since 2006 said: "The SME platform may become a cause of concern for the general investors like the small capital-based companies in the main market. As the number of shares of the SME companies is low, investors speculate that the stock price will rise further and buy the shares.”
