BSEC relaxes margin loan rules to promote good shares

With an aim to give a boost to the ailing stocks, the securities regulator Bangladesh Securities and Exchange Commission (BSEC) extended margin loan benefits for the purchase of stocks with sound fundamental base.

As per a BSEC regulation issued on Tuesday, investors will now be able to avail of margin loans for the share purchase of a company with price earnings ratio (P/E ratios) of 50, higher than the earlier limit of 40.

At the same time, the company must belong to the category ‘A’ for three consecutive years and have a paid-up capital of minimum Tk 50 crore.

This move aims to encourage investors to invest in good shares and benefit from additional loan benefits.

However, no margin loan will be allowed for companies with a P/E ratio over 40 if they cannot meet the above two conditions.

The P/E ratio is the ratio for valuing a company that measures its current share price relative to its per-share earnings. It is calculated by dividing the current market price per share by the company’s earnings per share.

The BSEC regulations, however, do not allow investors to buy overvalued or weak companies’ shares with the borrowed money.