Stock markets hit by Tk 8,673cr in negative equity

The much-discussed negative equity of the capital market portfolios totaled Tk 8, 673 crore at the end of September last year, according to regulatory filings by brokers and merchant bankers.

The figure was Tk 12,250 crore in 2020 and Tk 9,091 crore in 2017, the data showed.

However, the Bangladesh Securities and Exchange Commission (BSEC) is unhappy with the current negative equity status.

Amidst the circumstances, the regulator is expected to order the brokerage houses and merchant banks to solve the negative equity problem by this year, said BSEC officials.

“If they fail to do so, even the licences can be revoked,” said an official on anonymity.

Negative equities in the investors’ accounts with the twenty-nine merchant banks stood at Tk 3,645 crore, making up 42 per cent of the total equity, and Tk 4,930 crore were in the clients’ accounts with brokerage firms or TREC holders.

And Chittagong Stock Exchange’s TREC holders’ clients have negative equities worth Tk 98 crore.

“The BSEC has been working to wipe out negative equity from the stock market,” BSEC Commissioner Md Abdul Halim told The Business Post.

“We want to minimise the negative equity by this year. For this, the BSEC has already started the process,” he said.

The BSEC observed that only a few stockbrokers and merchant bankers control a lion’s share of the negative equity, said the commissioner.

“This problem can be solved once the government provides soft-loan for a long period,” said a merchant banker asking not to be named.

Earlier, a portfolio cannot be used for transactions if equity runs into negative after taking margin loans, said the BSEC soon after the market crash in 2010.