FE Report

Dhaka stocks dropped Monday on an order by the securities regulator halting extending of any credit for purchase of shares of Aftab Automobiles and all listed mutual funds.

In a major move to cool down the market, the Securities and Exchange Commission (SEC) directed the Dhaka Stock Exchange (DSE), merchant banks, portfolio managers, dealers and brokers not to lend any money to their clients to purchase shares of Aftab Automobiles and mutual funds, terming investment in those scrips 'risky.'

Earlier the SEC had suspended the margin loan facility to 28 companies, most of which are in the A and B categories. It also issued the same ban on paper shares and poor-performing Z-category companies.

However, Monday's SEC move came a day after the investment sector saw a bull-run on the hopes that the court would deliver a verdict on the mutual fund case remaining pending for long. Currently, 18 mutual funds are listed with the premier bourse of the country.

The benchmark DSE General Index (DGEN) lost

14.92 points or 0.44 per cent to close at 3341.59. The broader DSE All Shares Price Index (DSI) closed at 2800.05 with a fall of 13.71 points or 0.48 per cent while the DSE-20 blue chip index slid 2.30 points or 0.10 per cent to 2251.47.

Out of 232 issues traded on the day, 160 declined and 72 gained.

The latest SEC move aimed at reining in share prices left the market in the red, a stock broker said. Some, however, said profit-taking on shares of mutual funds and non-banking financial institutions also played a role in it after a sharp rally the previous session.

"Short-term price correction is better than long-term," Arif Khan, deputy managing director of IDLC Finance, told the FE.

Many of the mutual funds became overvalued in the last one-month on the speculation that the mutual fund operators would soon be able to announce dividends, remaining pending for the last two years due to a legal bar, he said.

"More availability of shares should be ensured to help stabilise the market, which has generated a lot of interest," he added.

The market started on a positive note, gaining 21 points in the first half an hour. Then it struggled to stage a comeback riding on the banking stocks before finishing in the red.

The majority of the mutual funds dipped on the day the way they surged the previous day and shares of non-banking financial institutions also edged lower in a reversal of the previous session's trend.

Most of the banking stocks, the bellwether of the Dhaka stock market, gained on the day putting an end to a losing streak of two weeks. However, insurance issues declined while in the energy sector all the issues except Titas Gas nudged higher. Most of the pharmaceutical companies lost. However, the stock market heavyweights Beximco Pharma and Square Pharma gained marginally.

Bextex, the textile arm of the industrial conglomerate Beximco Group, was the top turnover leader with shares worth Tk 1.01 billion traded. A large volume of shares of the company were traded, as the news spread that it would expand its business by purchasing a denim plant equipped with European machinery.

This will more than double Bextex's denim fabric capacity to 25 million yards per year and the project is expected to be fully operational by June next.