A Rollercoaster Year For Investors
Thursday, 31 December 2009

The year 2009 brought moments of joy and sorrow for stock investors as the landmark listing of giant Grameenphone sent market capitalisation skyrocketing, but naked intervention caused plenty of market jitters.

The year was also marked by wild share price fluctuations, highest single day turnover, an OTC market and introduction of book building pricing method for floatation of IPOs (initial public offering).

The year, however, opened with a sluggish tone, which prevailed through the first quarter (January-March) as investors were sceptical recalling the share market scam in 1996, during the past Awami League government.

Nevertheless, the following two quarters saw a bull run on some government initiatives like cut in bank deposit interest rates and readjustments of margin loan.

The market also witnessed some erosion in investors' confidence due to interventions of Securities and Exchange Commission (SEC).

The market capitalisation surged by almost 82 percent over the year from Tk 104,678 crore on January 1 to Tk 190,322 crore on Wednesday (Dec 30). The market capitalisation to GDP ratio stands at around 30 percent, which was only 18.75 percent in the beginning of the year.

The prime bourse's key index, the DGEN rose by 1,728 points or 61.5 percent through out the year, backed by the country's largest ever listing of GP, which contributed some 700 points.

The single day turnover also reached an all-time high of Tk 1,245 crore on Oct 20.

Eighteen companies raised about Tk 850 crore from the market this year including the largest floating in the country's history by GP, which alone added about Tk 486 crore in public offering.

All the IPOs were oversubscribed, which analysts see as an expression of the investors' confidence in the capital market.

Meanwhile, the number of beneficiary owner's (BO) account reached 2 million by the end of the year, which was around 1.5 million in the beginning of the year, according to figures obtained from the Central Depositary Bangladesh Ltd (CDBL).

NEW FEATURES

The newest features of the capital market was the introduction of an over-the-counter (OTC) market to trade junk shares and the IPO pricing method of book building.

Dhaka Stock Exchange inaugurated its OTC market on Sep 6 in a bid to facilitate trading of non-performing, under-performing and delisted companies, but it took the prime bourse authority almost a month to delist scrips from the main board to include them in the OTC market.

Meanwhile, on Dec 23, the Securities and Exchange Commission cleared a UAE-Bangladesh joint venture company, RAK Ceramics to go public under the book building method after the SEC allowed the price fixing mechanism in March 2009.

The SEC then said that the new method would encourage private-sector entrepreneurs to list their large and profitable companies on bourses at fair prices.

Usually, the market regulator approves the price of a primary share upon proposals from the company to float.
Under the method, institutional investors bid for shares through which a price is discovered.

A weighted average price is fixed based on the highest and lowest price and shares are allotted for institutions at the weighted average price.

The lowest price is considered a cut-off price for public offers or retail investors.

GP: TALK OF THE YEAR

The much-awaited listing of Grameenphone got a green signal from the market regulator in August after almost two years of speculation.

The news created a hype among the investors in Bangladesh, which attracted hundreds of new investors to enter the market.

Subscriptions of the initial public offering (IPO) closed in October, which was oversubscribed by over three times.

The Tk 4.86 billion offering, the largest of the market to date, opened on October 4, setting off a frantic rush of investors forcing banks to open extra desks to accept all the applications.

It closed just four days later, on Oct 8, for locals; NRBs had until Oct 18.

The record IPO attracted subscriptions worth Tk 17.25 billion from over one million prospective investors.

The Grameenphone shares made debut on the bourses on November 16 as the largest-ever issue with 135 crore shares worth Tk 10 each causing 700 added points in Dhaka stock's benchmark index.

It also augmented the market capitalisation by Tk 20,000 crore.
The size of the issue, largest in the country's history, caused it to appear as a market mover.

A price movement by Tk 1 in GP shares results the indices to move by 4 points.

The company raised Tk 486 crore through initial public offerings (IPO) and another Tk 486 crore through pre-IPO or private placement.

MFs: DISPUTE OF THE YEAR

Mutual funds remained the most debatable issue of the year because of a regulatory intervention followed by a writ in the High Court challenging the decision.

In July, 2008, the SEC amended the rule regarding mutual funds where it prohibited mutual funds to increase its paid up capital through issuing rights shares.

The decision also barred mutual fund operators to issue bonus shares as dividend.

The news of restrictions, just two days before the closing of accounts of mutual funds angered retail investors, followed by demonstrations by them and a slump in the prices of MFs.

Consequently, the market slipped into the red due to sell-offs as investor confidence on the market went down.

Three retail investors Ibrahim Akand, Raihana Haque, Delwar Hossain filed writ petition in the HC on Aug 28, 2008, challenging SEC's decision on Mutual Fund.

The case and its much-awaited verdict, given by the Supreme Court in November 2009, which overturned the SEC decision, put MFs in the limelight in the year.

The court verdict allowed closed-end mutual funds to issue bonus shares or rights issues that will be subject to approval from the SEC.

Retail investors several times took to the streets throughout the year, demanding a solution.

However, it is still yet to be resolved as the market regulator managed to get a stay order on the HC decision to appeal against the verdict.

Meanwhile, another regulatory move regarding MFs created agitation among investors.

The SEC has set the two-year time-frame for the listed closed-end mutual funds without tenure for their redemption.

It also said that in future the tenure of newly approved funds can not be extended beyond ten years.

According to the SEC directive closed-end mutual funds, which have crossed their tenures of ten years, must be re-deemed by 2011.

The funds, which has to be re-deemed by 2011 are: 1st BSRS, 1st ICB, 2nd ICB, 3rd ICB, 4th ICB, 5th ICB, 6th ICB, 7th ICB and 8th ICB.

A sharp decline in prices of MFs triggered agitations of investors, who called press conferences to ventilate their grievances.

A group of retail investors even announced to go on 'hunger strike unto death' protesting the market regulator's intervention.

Despite the odds, the stock market had a moment of joy in and is looking forward to thrive in the New Year.

DSE president Rakibur Rahman said Tuesday that they see more stronger and stable capital market in the coming year.

Citing achievements like GP listing, highest turnover, records in market capitalisation and key indices, introduction of book building method, he told the media that the successes had boosted investors' confidence.

"If the trend continues next year and new companies will get listed on the bourses, daily turnover may reach Tk 3,000 crore level by December 2010."

Rahman, however, cane down hard on the government for its intervention in the market in 2009.

Source: bdnews24.com

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