BSEC further relaxes margin loan rules

The securities regulator Bangladesh Securities and Exchange Commission (BSEC) has further relaxed margin loan regulations in a bid to revitalise the country’s capital market.

In a directive issued on Wednesday, the stock market regulator said Tk 30 crore paid-up capital would be enough for the listed firms that remained in the category ‘A’ for three consecutive years, to see their marginable stocks up to the price-earnings (PE) ratio of 50 from now on.

On April 18, the regulator, to lend a hand to the depressed stock market, had relaxed the regulations on margin loans, based on which the stockbrokers and merchant banks loaned money to their clients to buy more shares or other listed securities.

Usually, stocks are marginable as long as their PE ratio is not above 40, they are not in the Z category, their debut trading was not in the last 30 working days, or they did not come up from the category ‘Z’ in the last seven working days.

Initially, two weeks ago, the BSEC relaxed margin rules for stable stocks that remain in the category ‘A’ for three consecutive years and also have a decent capital size of Tk 50 crore.

The decision helped the depressed stock market run a bit over nine consecutive winning sessions till the end of April, and in May, there was some selloff amid profit booking pressure.

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.