#5

Last Week Market News Summary

A biggest single day drastic drop had happened last week in Dhaka Stock Exchange that was triggered by securities regulators when authorities reset cap on Margin account to reduce borrowing money from merchant bankers. To set stock market under easy going and realistic money following into the capital market, SEC enacted a new margin loan policy which negatively impacted on investors for a day. In a result, market index dragged to 103.73 points, and such a drop occurred in July 5th in last year when the index dropped to 103 to 5399.64 that was a 1.88 percent from the previous day.

SEC called upon all brokerage firms and merchant banks to provide margin loan to 1:1 from 1:1.5, such a margin loan decision came up a few days after when SEC already once settled margin loan at a ratio of 1:1.5 down from 1:2, this new policy on margin loans will be affected by Feb 7th on Sunday. The margin loan has been re-examined then enacted again to influence investors taking conservative measures in buying shares of companies’ PE floating at 50 or less. It is widely practiced in many other industrial countries where you can only borrow 50% of total investment; such a percentage of loans in stock market is regulated in USA for years. In order to buy Tk. 1000 worth of shares you can only borrow as high as 500 Tk. and other 500 Tk. has to come from your own pocket. The margin loan ratio 1:1 is much about conservative approach protecting investors from falling into higher debt burden in a situation when market faces huge drop as well as share prices that investors are holding and that can lead into inevitably having higher percentage of loans comparing what investors have started with own investment money.

Although SEC’s new plan is for protecting share market under control, the all share index (DSI) lost 86.57 points or 1.91 percent to close 4445.80, and also blue chips stocks in DSE-20 shed 71.68 points or 2.29 percent to 3049.46, in following trading day, the market rebounded regardless of what regulators tried to drag the market down from overheated market which is result of overflowing investing money in shares whose PEs are floating over 50 and even 100.

A new budget has been approved by the Finance minister for the SEC to facilitate Bangladesh Capital Market Institute (BCMI) with a greater knowledge based systematic market system that will be implemented by a team of skilled and professional people with the help of ADB and with Tk. 85.6 millions. The budget of 85.6 million Tk. will be used for buying necessary books, computers, software and other necessary materials for this project that will be affiliated with University of Dhaka or the National University.

It is also said by SEC executive directors that the objective of such a institute will provide all the necessary classes for investors as well as people in the firms in order to achieve certification, diplomas and even Master’s degrees, as higher as Ph.D. More importantly such a project can enhance knowledge and professional based investment environment to reach a set of goals of upholding the stock market reputation around the world and guiding to positive direction to bring market stability and steady progress in long-run.

In last week, a news came up that Grameenphone Ltd. and Orascam Telecom Bangladesh Ltd. together have signed an agreement on February 1st , 2010 to share the networks across the country that will bring benefits by lowering network cost with effective and faster services for both companies by sharing the same networks facility. Just to mention here in such an agreement, no other details have been given regarding to the number of years of contract and how to deal with in a situation when both companies cannot rely on same networks because of expansion of business model and increase of clients usages.

A new book building system has been implemented by Dhaka Stock Exchange that is currently up and running through a web site named www.bbsbangladesh.com and only a selective authorized institution of RAK Ceramics are allowed to follow book building process and bid on upcoming IPO on February 7th to determine the IPO price. To run this first time book building operation of the RAK Ceramics about 350 stakeholders are given instructions and necessary training in regard to participation of book building bidding. Investors are welcome to viewing the bidding process and the prices but only authorized stakeholder are eligible to login to the system and take a part of bidding. In an interest of participation in bidding by institutes need filling out the form through websites that will process offloading their shares through booking method.

The product level has been a double after Armait Ltd. has initiated to build second manufacturing unit and become source of increasing its capacity to 6.0 million square per year from 3.0 million square meters. The net worth of second production facility is Tk. 145 millions that will cope with current market demands which is rapidly growing at the face of industrial booming across the country. Aramit Ltd. Is a country’s leading manufacturing of asbestos roofing materials, drainage, ceiling insulating sheets that become very popular across the country due to its resistance to heat, electrical, and chemical damage and sound proof.

Apart from production of its own items Aramit Ltd is the prime sponsor of other sister concern companies of the Aramit group having significant portion of shares of Aramit Cement, Aramit Footwear Ltd, Aramit Steel Pipes, Aramit Thai Aluminium and Aramit Power Ltd, said the company chairman.

SQ group released a news that they are going to list on bourses in June, 2010 that is now under plan to raise an amount of Tk. 150 crore from the public offering but the amount can go higher as per SQ group’s requirement to complete the massive expansion. The company is considered as a major high-end exporter in garments industry, however, moving forward to setup an exclusive garment factory to produce underwear garments and that is a new niche market growing rapidly in international markets.

SQ Celsius represents outstanding record of holding with present paid-up capital more than Tk 50 crore, employing the number of its workers is 7,000 and inncluding entire group is 10,000 workers that may increase its capacity and enter into new market area to increase the amount of exports which is $70 million in 2009 and revenues in the future.