5 YEARS OF AL GOVT
2010-11 stock crash still haunts victims
Govt yet to bring any scamster to bookAhmed Shawki and HM Murtuza
The stock market crash in 2010-11 resulted mainly from share price manipulation by powerful cartels took centre stage in the five-year tenure of the Awami League-led government.
The biggest market crash in the country’s history that left thousands of investors penniless still haunts the sufferers.
According to experts and stakeholders, the small-scale investors affected by the crash are still languishing as the government failed to give the market any significant boost and punish the manipulators.
They said the previous AL-led government had faced stock market crash in 1996 and failed to punish the culprits that time too.
Many of the perpetrators of the 1996 crash, according to a government probe report, were allegedly involved in the 2010 market crash, they said.
‘The government could not handle the disaster resulted from the market crash and none of the alleged manipulators were brought to book,’ former SEC chairman Faruque Ahmed Siddiqui told New Age.
He said the central bank had failed to oversee the banks’ excessive investment in stocks in 2009 and the banks are still out of the BB-set limit in terms of their stock market exposure.
Experts and market stakeholders said policy failure of the AL-led government and lack of coordination between the money market regulator, Bangladesh Bank, and the securities market regulator, Bangladesh Securities and Exchange Commission, made the market vulnerable.
Sweeping comments made by the government high-ups frequently during the crisis period hurt the investors’ sentiment and affected the market, they said.
The steady rise of DGEN, the benchmark general index of Dhaka Stock Exchange, from 2,795.33 points in January 2009 to 4,535.53 points in January 2010 had attracted both the institutional and small-scale investors to the securities market.
Sudden investment inflow, mostly from the banking sector, had given rise to a boom in 2010 on which the DGEN had skyrocketed by 82.87 per cent to 8,290.41 points, with its peak of 8,918.51 points reached on December 5 in the year with a turnover of Tk 3,249 crore.
Powerful market cartels composed of speculators, brokers, auditors, company-owners, and even officials of regulatory bodies, allegedly had used the huge liquidity flow to generate a price surge that had gone far above the fundamentals of the companies concerned.
In 2009, the BSEC (then SEC) and the BB asked the commercial banks to transform their merchant banking departments into separate legal entities which turned the banks’ investments in their merchant bank wings into loans.
The BB, however, in December 2010 directed the commercial banks to reduce by August 21, 2011 the amount of the credit they had given to single borrowers to within the ceiling of 15 per cent of their paid-up capital.
That had forced the merchant banks to sell off their investors’ shares to ensure that their parent banks could keep their single borrower exposure within the BB-set limit.
All the factors acting together brought down the unsustainable market system in just two months, with the DGEN crash-landing from 8,723.18 points on December 1, 2010 to 7,572.61 points on January 30, 2011, producing the big bang of the crash, the aftershocks of which have since been continuing to decrease the share prices further.
The worst-ever stock crash in the country’s history had wiped out even the initial capital investment made by thousands of investors.
The aftershock of the market crash of late 2010 had continued throughout the following years where the DGEN had lost 3,032 points in 2011 and 1,038 points in 2012.
The DGEN hit the lowest ebb on January 4, 2013 at 3,383.23 points since November 15, 2009.
The Dhaka bourse introduced new general index, DSEX, on January 28 last year which hit its lowest value at 3,438.90 points on April 30 this year and reached its highest at 4,439.60 points on November 20.
Bangladesh Merchant Bankers Association vice-president Akter Hossain Sannamat told New Age, ‘The market had increased unusually in 2009-2010 due to policy mismatch between the central bank and the capital market regulator. Finance minister AMA Muhith has already admitted to the mismatch.’
‘Some of the government’s initiatives
taken to restore the investors’ confidence have been implemented, but the market is yet to come out of the sluggish trend,’ he said.
After the crash in December 2010-January 2011, the government formed a high-powered probe committee headed by Krishi Bank chairman Ibrahim Khaled to investigate into the disaster.
The committee submitted its report with a number of recommendations including restructuring of the SEC (now BSEC), further investigation into transactions of some suspected market manipulators and bringing changes in rules but the government’s foot-dragging in implementing the suggestions only intensified further the fallout of the crash.
In June 2011, the government allowed investment of undisclosed or black money in stocks, which boosted the market in July but failed to sustain the momentum.
On November 23, 2011 the BSEC announced a stimulus package in line with an instruction of the prime minister, Sheikh Hasina, but the affected small-scale investors are yet to get benefit out of the package due to its sluggish implementation.
The government in the last two years took initiatives to waive 50 per cent interest on margin loans for the small-scale investors affected by the stock market crash and introduced a refinance scheme of Tk 900 crore, but the investors are yet to get benefit out of the initiatives.
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