The New Nation - Internet Edition

Mashiur Rahaman

The Dhaka Stock Exchange reached a new all time high turnover record yesterday. The prime equity market closed with 3.44 crore shares, traded within a single trading session.

The last highest turnover was recorded at 3.17 shares traded on October 10, 2007.

It was a big appreciation of the Securities and Exchange Commission (SEC) for their recent decisions, said traders while talking to The New Nation. "Investors have enjoyed trading freedom after the SEC green signal to netting trade, issue last week," said a trader.

On the other hand, recent SEC notification to rise margin loan ratio from 1:05 to 1:1 to the merchant banks have generated hope among investors, said an official from the DSE.

"Both the SEC decision was the key factor what we have witnessed today. It is a sign for the market to retreat its lost status, which was also off coursed by another SEC notice to shrink loans margin," said a market expert.

According to him, SEC has issued a notice to all merchant banks, allowing double loan issue against investors' capital. It was meant to increase capital inflow in the equity market, which is in a kind of capital shortage situation after the involvement of two state-owned petroleum companies.

"Capital market was badly in need of capital inflow. After the involvement of Jamuna and Meghna Petroleum in capital business, near about Tk1000 crore were squeezed out of the market, causing shortage of floating capital," said a market expert.

In this circumstances, SEC order would allow merchant banks to inflow more trading capital as investment loans. It was a wise decision to take, he added.

On the other hand, some market experts couldn't find such hope in the SEC permission on rising margin of merchant bank loan.

"It is the Clause-7 of SEC notice, troubling merchant bankers. Order to calculate Net Asset Value (NAV) in issuing loans, does not really allow us to issue loan as 1:1 ratio," said a source from the merchant bank. According to him, the clause-7 of SEC notice directs banks to add closing value (CV) of a particular share with NAV, then divide the total amount with two [CV+NAV/2].

Following this order, a trader with Tk1000 net capital will not get the same amount as bank loans. It means, the SEC order has not allowed the merchant bankers to issue 1:1 trading loan, he explained.

"Obviously, we do appreciate the rise of loan margin by SEC but this particular clause will cause confusion among our clients. It was unnecessary at this position," he added.

However, he informed that the merchant banks are considering to set a common loan issuance strategy, which would be near about 1:0.75 ratio.

Regarding yesterday's record turnover, he termed it unwise move by new traders. He also advised traders to avoid craze trading.

The DSE general index witnessed 1.72 per cent growth yesterday, added 49.67 points. The index closed at 2939.92 points at closing. Both the DSE-20 and DSI index also enjoyed with gain on the day added 37.09 and 40.09 points respectively.

Total shares of 159 companies were reported advanced, 64 declined and 13 remained unchanged. Market capitalisation on the day was Tk 343.77 crore, as reported.