Investors in Shock and Fury

Posted by BankInfo on Mon, Jan 10 2011 08:23 pm

Many employees like Aminul Haque, a government employee, came to the booming share market to invest in bank shares expecting quick returns before quitting the scene. He infact came into this business two months ago and invested 2 lac taka already expecting big hand. All was well for the 29-year-old until December 19 last year when the premier bourse lost over 550 points, which ate up a significant part of his profits. But he did not worry after his mentor, who works for a brokerage house, assured him of a quick turnaround.

An irregular investor, Haque, with an MSc in biochemistry from a public university, stayed put, but he saw his hopes shattered in a storm that brought the stockmarket down to its knees. "I have lost half of what I was worth. This is dangerous. I never thought I would have to witness such disaster," he told The Daily Star over telephone. "I came to the market with a particular target, but all my hopes have been dashed," admitted a demoralised Haque. His comments came after the authorities stopped trading of both Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) before noon yesterday following a freefall of share prices on the bourses that stomached the highest-ever single day drop in indices.

The closure came at 11:50am after the benchmark index of the premier bourse, DGEN Index, slumped by 660 points and CSE Index, 914 points -- their highest drops. Haque was not alone. Thousands like him rushed to the markets with little knowledge about the share market, fundamentals of the companies they were investing in, despite repeated warnings from analysts. Nusrat Jahan, a student of Bangladesh Islami University, invested Tk 4.5 lakh last year and made it to Tk 10 lakh during the period. Now her current portfolio value went below the initial investment. Small-time retail investors blamed the regulator for failing to act fast enough, saying many have lost at least half of their investments due to the market collapse.

Mohammad Shihabuddin, who works for an audit firm, had the prices of his shares just halved. "Many of my colleagues are involved in the trade and they all are in shock," he told The Daily Star by phone. He said he understood that a correction was due, but it happened melodramatically. "The correction should take place gradually, not through drastic ups and downs." General investors said the regulator should have taken the closure decision earlier or during the first few minutes of yesterday's trade, which would have help avoid the doom.

"Many investors like us would have been able to avoid the slump if the decisions had been taken earlier. The collapse has already made many of us losers," said Utpal Kumar, an investor. Utpal, also a student, said the market has collapsed, as the central bank has imposed restrictions on banks and other financial institutions investing in the market. "The financial institutions, particularly banks, have already over-invested in the market. But following restrictions from Bangladesh Bank, they are not investing anymore. The market will go up once they start trading again." He said the investors who joined the market in November and December have been particularly affected. "Most of them have lost up to 70 percent on their investment."

Jewel Islam, a stock investor since 2006, blamed the authorities for the slump, as "they talk too much", doing more harm than good to the market. The 29-year-old business graduate said the banks which represent the bellwether stocks were responsible for the catastrophe. "They have been investing heavily in the market putting aside their core business."  anks logged as high as 90 percent growth in their operating profit in 2010, largely riding on the stockmarket boom. Many banks earned a big portion of their profit from the stockmarket. A bank involved in Islamic banking made a profit of about Tk 400 crore, of which Tk 100 crore came from its brokerage business.

He said many investors have withdrawn their money before the Eid. "As the marking is nose-diving, they will invest now. Small investors like us will suffer most," said Islam, who has invested Tk 2 lakh in the premier bourse. Shariful Alam, another small investor, said the market has fallen as investors are withdrawing money from the secondary market and diverting to new initial public offerings. Nahid Hasan, an investor, who also has lost about half in prices of his shares, said the decision was right, but it should have come earlier. He said his portfolio was valued at Tk 10 lakh just before the latest round of slumps. "It is now worth Tk 5 lakh only."

News: The Daily Star/Bangladesh/11 Jan 2011