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Govt positive about Tk10,000cr fund to prop up stock market

  • Published at 10:14 pm December 22nd, 2019
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The ministry last week sent letters seeking opinions of the Bangladesh Securities and Exchange Commission (BSEC) and the Bangladesh Bank on the issue

The finance ministry is working to form a Tk10,000 crore fund in support of the country’s sagging capital market. 

Earlier, the stockbrokers especially the banks’ subsidiary brokerage houses had submitted a proposal to the finance ministry, seeking Tk10,000 crore to inject into the capital market.

The ministry last week sent letters seeking opinions of the Bangladesh Securities and Exchange Commission (BSEC) and the Bangladesh Bank on the issue. 

The regulators are positive about forming a Tk10,000 crore low-interest fund from the government to invest in the ailing stock market, high officials of BSEC and the central bank have said.

Requesting anonymity, a top BSEC official told Dhaka Tribune: “We have received the letter. A team is now examining the proposal and reply to finance ministry very soon.”

He said a hefty fund if disbursed from the government would help make a turnaround in the stock market.

A top official of the central bank has also told Dhaka Tribune that the Bangladesh Bank is working to fix the structure and conditions of loan from the fund.

Managing director and chief executive officer of 25 broker and merchant banks are signatories to the proposal. The fund should be for a period of six years at a flat interest rate of 3% and half yearly payment of interest, according to the proposal.

Sayedur Rahman, president of Bangladesh Merchant Bankers' Association and EBL Securities chief executive officer, has told Dhaka Tribune that they want the fund for a period of six years at a flat interest rate of 3%. This fund will play a supportive role in market."

He said all market intermediaries such as stockbrokers, merchant banks, and asset management companies would be allowed to get the loan facility.

Sayedur Rahman also said that the government would decide who would govern the fund and set modality to secure the funds.

Dhaka Bank Securities CEO Mohammad Ali said: "We have requested the government to give the fund directly to the stock market intermediaries to ensure a stable, growing and vibrant stock market. Now we can hope that the government is positive about the proposal.”

“We believe that with the injection of this fund, the capital market will become effective and contribute to the overall economy," he added.

The proposed fund will be used to support the retail investors having negative shares as well as the intermediaries having unrealized loss in dealer account which occurred due to margin loan disbursements and capital market investment.

The prime index of Dhaka Stock Exchange (DSE), DSEX, lost about 1,419 points from its highest hit of 5,950 points, since January 24 this year.

DSEX has been witnessing a steep fall in recent times due mainly to liquidity crisis. 

Market analysts and insiders say the investors are lacking confidence for long as the major macroeconomic indicators keep slumping.

Concerns over negative export growth, soaring non-performing loans (NPLs) and decreasing private sector credit exacerbated the ongoing confidence crisis among retail, institutional and foreign investors.

In 2013, the state-owned Investment Corporation of Bangladesh (ICB) received Tk900 crore from the central bank in three installments under the capital market refinancing scheme. 

The government provided the fund to reduce the suffering of small investors during the 2010-11 stock market debacle.