BSEC writes to four SOBs to pump more funds into stocks

The Bangladesh Securities and Exchange Commission (BSEC) asked four state-owned banks (SOBs) to make fresh investments in the capital market after forming special funds.

It also instructed Sonali, Janata, Rupali and Agrani banks to furnish information about their portfolio investment status as early as possible to the securities regulator, according to a letter issued on Tuesday.

“The investor base in Bangladesh’s capital market is mostly dominated by retail investors, whose size accounts for around 80 per cent of total investors. It is expected that institutional investors should dominate trading activities instead of retail ones to improve the stability of the country’s stock market,” said the letter.

On February 10, 2020, the Bangladesh Bank approved banks’ formation of a Tk 200 crore special fund to invest in the stock market, which will not be included in the calculation of the capital market exposure limit.

The fund will remain valid until February 2025, and the banks can take advantage of the loans until January 13, 2025.

The Banking Companies Act 1991, amended in 2013, allows a bank’s stock market exposure to up to 25 per cent of its capital, which includes paid-up capital, share premium, statutory reserve, and retained earnings.

BSEC spokesperson Mohammad Rezaul Karim told The Business Post that the stock market regulator requested the four banks to take the necessary steps to make fresh investments through their own portfolios.

The banks have also been requested to form a special fund for increasing investment in the stock market, he said.

To prevent the market’s fall caused by the Russia-Ukraine conflict, the BSEC took a series of measures. On March 8, the BSEC instructed stock exchanges to calculate the lower limit circuit breaker at 2 per cent instead of 10 per cent. With effect from Thursday, the commission has fixed the limit at 5 percent.

The measures successfully prevented the market’s fall. The benchmark DSEX index added around 300 points after the mechanisms. Before the measures, the index continued to plunge and shed almost 500 points.

On March 14 this year, BSEC sought the latest positions of banks’ exposure to the capital market.