DSE hits new record in turnover following decision on face value

FE Report

The Dhaka Stock Exchange (DSE) hit a new record in turnover Monday, crossing Tk 18.0 billion-mark, as the investors switched from one stock to another, after the finance ministry okayed the conversion of face value, dealers said.

But share prices at the prime bourse dropped slightly for the second straight session amid volatile trading despite steep rise in banking and leasing stocks, which soared 3.62 per cent and 2.23 per cent respectively

The benchmark DSE General Index (DGEN) ended at 5567.52 with a loss of 13.48 points or 0.24 per cent, dragged down by heavyweight Grameenphone that declined about five per cent.

The broader DSE All Shares Price Index (DSI) was down by 11.19 points or 0.24 per cent to end at 4580.08 while the DSE 20 blue chip index gained 30.47 points or 0.98 per cent to 3127.45.

Netting facility used by the investors pushed up the daily turnover to an all time high as it stood at Tk 18.67 billion, beating previous record of Tk 16.91 billion set on February 2.

"It is just because of the finance ministry's clearance for conversion of face value," said Ahmad Rashid, managing director of Rashid Investment Services.

"Substantial trading activities were seen in banking and leasing stocks as investors poured funds on the stocks, as most of their face values are Tk 100," he said.

The finance ministry on Sunday approved conversion of face value of shares from Tk 100 to Tk 10. More than 10 companies, mostly leasing and banks, have sought permission to change their face value to make the scrips affordable for the retailers.

"The finance ministry's decision prompted investors to move from one stock to another using netting facilities, taking the turnover to a new high," said Arif Khan, deputy managing director of the IDLC Finance Limited.

Investors who switched over position were mostly short-term profit takers, he added.

In 2008, the SEC reintroduced the financial adjustment facility or netting facility against transactions of A,B,G and N categories of shares to increase fund flow to the market.

Under the financial adjustment or netting facility, the investors are permitted to purchase stocks with the sale proceeds immediately after completing a deal which previously was not allowed.

Both Rashid and Arif ruled out speculation on entry of undisclosed money pushing the turnover up. "I don't think so because time is too short for such money to enter in the market," said Rashid.

The opportunity given by the government in the current fiscal year for whitening undisclosed money by investing on stocks will expire next month.

"Hefty turnover means hefty demand for shares and makes stocks overvalued in the shallow market," said Salahuddin Ahmed Khan, professor of finance at Dhaka University.

"Investment turns riskier when it comes to the overvalued stocks. Except for a few stocks, most of the scrips in our stock market are overpriced. So, investors should select the stocks carefully to get good return in future," he said.

Among the top 10 turnover leaders, most were from banking and leasing stocks. Beximco Ltd, flag ship company of the industrial conglomerate Beximco Group, topped the turnover list with shares worth Tk 1.137 billion changing hands. EXIM Bank was its closest rival with shares worth Tk 1.135 billion traded.

Other turnover leaders were Titas Gas, Summit Power, Southeast Bank, Premier Bank, LankaBangla Finance, Social Investment Bank (SIBL) and AB Bank.