Daily Star-January 25,2012 Wednesday
Stock dealers as institutional investors are almost inactive in investment, a sign of eroding confidence that may further pull down share prices in future.
As a result, the secondary market is driven mainly by retail investors, which analysts say is a bad sign.
The total amount of investment by the stock dealers is only around Tk 1,600 crore, which is less than 1 percent of the total market capitalisation of Tk 2,35,279 crore.
And a major portion of the Tk 1600 crore was invested in securities of currently non-listed companies that were in the IPO (initial public offering) process under book building method.
But now the investment has stagnated following the suspension of the book building method in January last year.
Of the Tk 1,600 crore, Tk 1,500 crore investment was made by 35 stock dealers that are subsidiaries of different banks and non-bank financial institutions.
And out of the total 200 stock dealers, 130 have investment in their own portfolios, while 50 have no investment and 20 are not in operations, according to statistics from the Securities and Exchange Commission and Dhaka Stock Exchange.
A stock dealer is a company or an organisation that trades securities for its own account.
When all are talking about bringing back normalcy in the market by increasing institutional investors' participation, the insignificant investment by the stock dealers themselves gives an alarming signal to the retail or individual investors.
It means the institutional investors are yet to get back confidence about the market or expecting a bearish trend in the days ahead, the analysts said.
Although there is no bar on the stock dealers' investment, their active participation is very much related to the confidence in the market, they said.
A relentless fall in share prices pulled down the key index of the Dhaka bourse to a 25-month low yesterday. The General Index of the premier bourse came down to 4,506 points after plunging 2.86 percent at yesterday's close.
Shakil Rizvi, president of the DSE, said the existing price level is not attracting the stock dealers for investment.
They are now behaving like the retail investors, he said.
“The stock dealers may also fear that the market may fall further. But the way they are thinking is devoid of professionalism,” he added.
Faruq Ahmad Siddiqi, a former chairman of the SEC, said there is no behavioural difference between the institutional investors and the retail ones.
“The institutions are behaving like the retail investors. When the market goes up, the institutions rush for buying like retailers and when the market comes down, they go for sale,” he said.
But the institutions should make responsible and long-term investment on the basis of the fundamentals of a company, he added.
Stock dealers as institutional investors are almost inactive in investment, a sign of eroding confidence that may further pull down share prices in future.
As a result, the secondary market is driven mainly by retail investors, which analysts say is a bad sign.
The total amount of investment by the stock dealers is only around Tk 1,600 crore, which is less than 1 percent of the total market capitalisation of Tk 2,35,279 crore.
And a major portion of the Tk 1600 crore was invested in securities of currently non-listed companies that were in the IPO (initial public offering) process under book building method.
But now the investment has stagnated following the suspension of the book building method in January last year.
Of the Tk 1,600 crore, Tk 1,500 crore investment was made by 35 stock dealers that are subsidiaries of different banks and non-bank financial institutions.
And out of the total 200 stock dealers, 130 have investment in their own portfolios, while 50 have no investment and 20 are not in operations, according to statistics from the Securities and Exchange Commission and Dhaka Stock Exchange.
A stock dealer is a company or an organisation that trades securities for its own account.
When all are talking about bringing back normalcy in the market by increasing institutional investors' participation, the insignificant investment by the stock dealers themselves gives an alarming signal to the retail or individual investors.
It means the institutional investors are yet to get back confidence about the market or expecting a bearish trend in the days ahead, the analysts said.
Although there is no bar on the stock dealers' investment, their active participation is very much related to the confidence in the market, they said.
A relentless fall in share prices pulled down the key index of the Dhaka bourse to a 25-month low yesterday. The General Index of the premier bourse came down to 4,506 points after plunging 2.86 percent at yesterday's close.
Shakil Rizvi, president of the DSE, said the existing price level is not attracting the stock dealers for investment.
They are now behaving like the retail investors, he said.
“The stock dealers may also fear that the market may fall further. But the way they are thinking is devoid of professionalism,” he added.
Faruq Ahmad Siddiqi, a former chairman of the SEC, said there is no behavioural difference between the institutional investors and the retail ones.
“The institutions are behaving like the retail investors. When the market goes up, the institutions rush for buying like retailers and when the market comes down, they go for sale,” he said.
But the institutions should make responsible and long-term investment on the basis of the fundamentals of a company, he added.
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