BSEC repeals index-linked margin loan control mechanism
Earlier in August, BSEC said if the DSEX remains below 8,000 mark, the margin loan ratio can be as high as 80% of client equity
The Bangladesh Securities and Exchange Commission (BSEC) has opted out of its stance to reduce margin loans from 80% to 50% as soon as the key stock market index goes above 8,000 points.
Now, broker and merchant banks can provide margin loans up to 80% of their clients’ equity against all the marginable securities having a price to earnings ratio of up to 40 no matter where the index is.
Earlier in August, the securities regulator said if the DSEX remains below 8,000 mark, the margin loan ratio can be as high as 80% of client equity and that would come down to 50% if the DSEX travels above the 8,000 mark.
The move came following the market selloff after the DSEX, the broad-based index at the Dhaka Stock Exchange (DSE) crossed 7,400 in early October.
Investors then began to fear that the market might face a sharp selloff, especially by investors who borrow from brokers and merchant banks on top of their own money to buy stocks, if the DSEX reaches 8,000.
Meanwhile, the market already fell by more than 500 points while many listed companies are posting stunning earnings growth, and many market experts are feeling that the BSEC’s index-linked margin loan control is working as a barrier for the spontaneous movement of the market.
Also the BSEC top officials used to agree that the potential of the Bangladesh capital market is very high to enjoy its bull runs in the coming years.
The regulators along with the capital market stakeholders are internationally promoting the investment opportunities here through road shows in many important global financial centers, including those in the Middle East, Europe and the USA.