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Stock prices of the small capital platform or the SME board jumped significantly on Thursday after the High Court stayed a regulatory term that requires an investor to invest at least Tk30 lakh to be qualified for trading SME shares.
Currently, an investor, according to the existing securities rules, must have a minimum stock investment of Tk 30 lakh to be qualified for trading on the SME board at the Dhaka Stock Exchange (DSE).
The High Court bench of Justice Md Ashfaqul Islam and Justice Md Suhrawardy on Wednesday stayed the BSEC rules for the next three months that offer the minimum requirement for an investor to be qualified for SME share trading.
The DSMEX, the benchmark index of the premier bourse’s SME platform, advanced 124.81 points or 9.18 per cent to settle the trading session at 1484.37 on Thursday.
Out of the 14 issues traded, all shares advanced on the SME trading floor at the DSE on the day.
Following the development, SME shares gained a maximum of 10 per cent and a lowest of 4.5 per cent.
According to market insiders, investors’ participation in the SME board increased significantly after the High Court granted a three-month stay on the securities regulator BSEC’s requirement that an investor must invest at least Tk 30 lakh to be qualified for share trading on the SME platform.
The court’s stay order, a leading stockbroker said, geared up investors’ participation exponentially just the day after the order was issued.
Meanwhile, speculations are being spread by a section of market participants that SME shares would rocket further, luring investors to buy more shares, it commented, adding that this tendency might create a risk for general investors because the SME shares are very low in number.
Earlier on February 17 this year, the BSEC slashed the minimum investment limit to Tk 20 lakh from Tk 50 lakh for an investor to be qualified for the trading of SME stocks.
But, the limit was later raised to Tk 30 lakh.
The SME board which was launched in late September 2021 had been receiving a tepid response from investors as the then investment requirement was very high to trade SME shares.
The DSE started to operate the platform with six companies.
The BSEC had also adopted some measures to make the SME platform vibrant, including the cancelation of investors’ registrations required for beginning the trade on the board.
Four SMEs which were shifted from the OTC market to the SME platform four months ago had failed to woo investors as they were struggling to improve their financial performances.
The companies were Apex Weaving and Finishing Mills, Wonderland Toys, Himadri, and Bengal Biscuits Ltd.
In November 2018, the BSEC approved the qualified investor offer (QIO) by amending some provisions of the Small Capital Companies Rules 2018.
Retail investors are still not allowed to buy shares in the SME platform as the market tends to be more volatile because of price volatility.
As per the BSEC rules, SMEs must have at least Tk 5 crore and not more than Tk 30 crore in paid-up capital after raising funds through an initial public offering.
The SME sector contributes as much as 60 per cent to India’s economy, about 70 per cent in China and Japan, but only 25 per cent in Bangladesh.
