Tradings of MBL 1st MF, BRAC Bank bond make debut Feb 8Tradings of MBL 1st Mutual Fund and Subordinated 25 per cent Convertible Bonds of BRAC Bank Limited will begin on the Dhaka Stock Exchange (DSE) February 8. According to a board meeting decision of DSE, trading of the units of MBL 1st Mutual Fund sponsored by Mercantile Bank Ltd will start under 'A' category. DSE Trading Code for MBL 1st Mutual Fund is "MBL1STMF" and DSE company code is 12184. On the other hand, BRAC Bank bonds will be traded under 'N' category. DSE Trading Code for Subordinated 25 per cent Convertible Bonds of BRAC Bank Ltd is "BRACSCBOND" and DSE company code is 26003.

The subscription of MBL MF opened on December 12, 2010 and closed December 19, 2010. The face value is Tk. 10.00 per unit with market lot of 500 Units. The Sponsor's Portion was 10,000,000 units, Pre IPO Placement Portion 40,000,000 units and Public Offer 50,000,000 units. The size of the MBL Fund was 100,000,000 units while the size of the fund was Tk. 1,000,000,000.00. LR Global Bangladesh Asset Management was the issue manager. On the other hand, the opening date for subscription of BRAC Bank bonds was December 5, 2010 while closed on December 9, 2010. BRAC Bank Limited raised the Tier II capital through repeat public offering in order to comply with the regulatory requirement of Bangladesh Bank. The proceeds of the public offering will strengthen the capital base of the bank and augment business expansion.

The Issue Manager was IDLC Finance Limited and City Bank Limited was the trustee. A total of 90 per cent of the total Issue size of the bond was offered to institutional investors including onshore and offshore investors and the remaining 10 per cent was offered to public through IPO. The Issue Size was Tk 3.0 billion. Each bond will have a Face Value of BDT 1,000 (One Thousand) with market lot of 5 (five) bonds each. MBL 1st Mutual Fund is the 32nd mutual fund listed on the DSE.

News: The Financila Express/Bangladesh/04 Feb 2011

The half-year Monetary Policy announced by Bangladesh Bank (BB) governor Dr Atiur Rahman
on Sunday last has shed light how the central bank helped recovery momentum in the economy.
The MPS, as the Monetary Policy Statement is called, said, recovery momentum in economic activities materialized in H1 FY11 as expected, aided by demand recovery in external markets, government’s fiscal stimulus package and BB’s supportive monetary policy measures. The agriculture sector output activities are buoyant in overall benign weather conditions, supported by timely access to inputs and financing.
Exports rebounded strongly with 41 per cent growth y-o-y during July-December 2010, with increase in shipments to both traditional and newer destinations.
Quantum index of medium and large scale manufacturing (available only up to July 2010) moved up 15.3 per cent y-o-y in July 2010, the first month of FY11.
Quantum index for small scale manufacturing weakened 9.2 per cent y-o-y in Q1 FY11 however, presumably because small manufacturers cannot afford captive power generators to cope with supply disruptions from the national grid.
Import payments increased 41.9 per cent y-o-y during July-October 2010 with 35.6 per cent increase in capital machinery imports and about 43 per cent increase in import of production inputs including fuel oil. Opening of new import LCs increased strongly by 43.8 per cent y-o-y in H1 FY11.
Growth in workers’ remittance inflows weakened to a mere 0.21 per cent y-o-y in H1 FY11.
Weak growth of inflows alongside high outflows for strongly rising imports and other commercial payments abroad generated depreciation pressure on Taka and rendered the local inter bank market net buyer from rather than net seller to BB by December 2010. Exports have grown as strongly as imports, but the import base being larger than export base, the trade deficit has widened in H1 FY11.
Taka depreciated against USD, with the weighted average inter bank rate at Taka 70.75 per USD as of 30 December 2010, against Taka 69.44 per USD as of 30 June, 2010. The inter bank market was net seller of USD funds to BB in Q1 FY11, but with rising import payment pressures turned into net buyers from BB in Q2.
Overall, the inter bank market bought USD 400.0 million from and sold USD 316.5 million to BB in H1 FY11.
Because of the emerging balance of payments pressures the government is looking for concessional assistance from official external donors including IMF and IDA; to finance higher public expenditure needed for the aspired leap forward to a high growth trajectory, and to widen foreign exchange availability for increased private sector investments.
BB’s monetary policies and programmes have sought to impact consumer price levels both by influencing key financial sector prices (policy interest rates, viz., repo and reverse repo rates) and by influencing broad money (M2) growth with changes in reserve money (RM, currency in issue plus balances of scheduled banks with BB) as instrument. Besides day to day changes in reserve money, cash reserve and statutory liquidity requirements (CRR, SLR) are also adjusted occasionally in influencing the M2 growth path. Money stock targeting retains relevance in economies with external capital account controls like Bangladesh. Effectiveness of monetary targeting diminishes with increasing openness in capital account, efforts to contract or expand money stock get counteracted by fund flows into or out of the domestic market; the reason why advanced open economies no longer use money stock targeting and resort solely to price based interventions.
Financial inclusion promotion measures in credit policies, alongside discouragement of financing for wasteful unproductive uses are the growth supportive features of BB’s monetary policy stance.
Domestic credit growth kept on gaining pace in H1 FY11, rising to 24.2 per cent y-o-y in November 2010 from 17.6 per cent of June 2010.
Growth in credit to public sector remained small at 9.6 per cent in November 2010, with credit to government and credit to other non financial public sector increasing 5.4 per cent and 29.9 per cent y-o-y (credit growth to SOEs that performed poorly in the past may again become cause for concern unless the new fund infusions yield the hoped for positive results).
Credit to the private sector has expanded even faster; growing 27.8 per cent y-o-y in November 2010 against 24.2 per cent of June 2010. Credit to private sector has thus been expanding much in excess of what may be reasonably needed for attaining the targeted real and nominal GDP growth.
The 38.3 per cent y-o-y rise in industrial term loan disbursements, 42.9 per cent rise in outstanding SME loans, and 18.8 per cent rise in outstanding agricultural loans apparently portray healthy composition of productive lending, but sample probes into actual loan utilization unearthed instances of diversion of industrial term loans into capital market (unavailability of new power and gas connections may have acted as inducement for diversion of loans drawn from banks negligent in end use tracking).
Credit growth faster than deposit growth (28.4 and 21.6 per cent y-o-y respectively as of December 2010) indicated lax attitude of banks in H1 FY11 in expanding lending commitments; time deposits growing slower than demand deposits (20.6 & 42.4 per cent y-o-y in November 2010 respectively) signified high liquidity preference amongst the public, presumably for engagements in capital market, evidenced by hectic trading in the stock exchanges.

News: The Independent / Bangladesh/ Feb-02-2011

The half-yearly Monetary Policy announced in Dhaka on Sunday detailed steps that the central Bangladesh Bank has taken in the field of banking sector.
The statement said, BB has initiated necessary corrective and preventive supervi sory steps against lending
discipline lapses in banks leading to loan diversion into unauthorized uses, holding bank CEOs responsible for oversight on loan utilization (November 2010). In the backdrop of skyrocketing real estate prices, banks have been asked (in April 2010) not to extend loans for land purchase.
Compliance surveillance on permitted ceiling of holding of capital market assets by banks was tightened in June 2010, with revised reporting instructions and supervisory arrangements.
In October 2010, general provisioning requirement on bank loans against stocks and shares was doubled to two per cent.
In December 2010, fifty per cent margin requirement was made mandatory on all consumer financing; and mandatory adjustment period of current overdrafts to rice traders was reduced to 30 days, to curtail tendency of speculative hoarding.
Besides the above mentioned supervisory measures to influence sectoral composition of credit, monetary policy measures adopted to influence cost and volume of credit included i) half per centage point increases in CRR and SLR for scheduled banks from mid May, and once again from mid December 2010, and ii) one per centage point increase in BB’s overnight repo and reverse repo interest rates from August 19, 2010.
Impact of these measures in the credit market remained largely imperceptible until towards the end of Q2 FY11, swamped out by seasonal large currency withdrawal spikes customary on occasion of the two Eid festivities.
The impact started showing up clearly from December in H2 FY11, coupled with pressure on market liquidity caused by heavy outflows for imports and other external payments such as income surplus/profit/ dividend repatriation by foreign ventures repatriation of post tax income surpluses of foreign airlines, shipping lines and so forth. Repo liquidity infusion in the market from BB had to be increased substantially following the CRR increase in mid- December, to ease the strong outflow related strains mentioned above.
The episode of pressure on liquidity brought to surface significant mismatches of Asset Liability Maturities in some banks, causing these to create unusually high spikes in overnight interbank interest rates.
BB has since been intrusively monitoring the ALM management practices in these banks.
BB’s mid-December infusion of repo liquidity much larger than the liquidity withdrawn by CRR increase has been questioned in some quarters as being tantamount to negation of the CRR increase, but the analogy is not correct.
CRR ties up with BB part of a scheduled bank’s own funds that it could use in credit creation, funds tied up as CRR are not remunerated.
Repo is a transient (overnight) facility at a cost to tide over liquidity difficulties arising from earlier commitments, not at all suitable for use in expanding customer lending.
A sharp price correction came about in the beginning of January 2011 in the country’s capital markets seen by analysts as overvalued from quite some months ago.
SEC and other concerned authorities moved quickly with confidence restoration measures (mainly activation of institutional investors in playing their due roles), successfully putting the market back on its feet after a day in freefall and trading stoppage.
Some quarters incorrectly attributed the sharp capital market price movements to the money market liquidity situation following the mid-December CRR increase.
Selling pressures that forced the price movements had little if anything to do with money market liquidity.
Investors offloading part of existing stockholdings to raise cash for three upcoming IPO subscriptions were apparently the proximate factors behind selling pressure that triggered the price correction; in just one of the three IPOs (of MJL), subscriptions worth Taka 26.4 billion were received against issue offer for Taka 6.1 billion.
The few banks with capital market asset holdings beyond permissible limits were allowed extended periods to scale down to permitted levels gradually, and had no reason to cause abrupt selling pressure.

News: The Independent / Bangladesh/ Feb-01-2011

The central bank unveiled Sunday its half-yearly monetary policy that aims at keeping inflation rate at around 7.0 per cent by the end of this fiscal through discouraging credit flow to unproductive sectors.

Other major thrust of the policy will on achieving an inclusive economic growth by facilitating productive sectors while keeping inflationary pressure under control.

"Monetary policy stance in the second half (H2) of this fiscal will, as before, remain accommodative for productive economic activities; while also firmly discouraging diversion and undue expansion of bank credit for wasteful unproductive uses, to stem build-up of inflationary pressures," Bangladesh Bank (BB) Governor Atiur Rahman told reporters at the central bank while releasing the monetary policy for January-June period of the fiscal 2010-11 (FY11).

He also said climatic adversities disrupting output in many regions around the world are pushing up global prices of food commodities; strong growth performance in emerging and developing economies is propping up global prices of energy and non-food industrial commodities as well.

"Against this backdrop, decline in the 12-month average CPI inflation in Bangladesh in H2 FY11 may be slower than expected earlier, remaining above the 6.5 per cent level targeted in government's FY11 budget. A level around 7.00 per cent appears to be likelier for June 2011," the central bank chief added.

He also said the government could re-fix energy price in H2 of this fiscal that will impart some upward spurt on non-food CPI inflation.

"Food price inflation remained volatile in H1 FY11 both domestically and globally, at 9.80 per cent in November in Bangladesh against 10.88 percent of June 2010," Dr. Rahman added.

The country's inflation as measured by consumers' price index (CPI) moved slightly in the month of November last mainly because of increase in prices of food items.

The inflation rate moved up to 8.14 per cent in November from 8.12 per cent of the previous month on the annual average basis, according to the Bangladesh Bureau of Statistics (BBS) data.

On the other hand, the point-to-point inflation rate rose to 7.54 per cent in November from 6.86 per cent in October 2010 despite declining prices of non-food items.

Stubbornly high food price inflation in neighboring fast growing India, and prevailing high international prices of food commodities mean that no calming influence on food prices are to be expected from private sector imports, the reason why local rice prices are high and rising even after a good aman harvest, the BB said.

"Monetary policy actions will have little leverage on rising food prices in this situation, fiscal measures by way of subsidized food grain sales from public stock may need to be expanded to ease hardships faced by low income population segments," the monetary policy said.

It also said higher food grain prices for growers have important medium term upsides however; enabling the government to scale down input subsidies as growers get market prices adequately covering their costs and remunerating their efforts, and the price incentive eliciting higher output responses is eventually stabilising prices.

"Barring unforeseen new difficulties, the economy looks well poised to attain the 6.7 per cent real gross domestic product (GDP) growth targeted for FY11, as also to leap forward to growth performance well beyond seven percent in FY12," the BB governor noted.

The central bank has taken measures to reduce credit flow to the private sector through asking some banks to bring down their credit deposit ratio (CDR) at a rational level and imposing restriction on consumer financing.

"We've already imposed restriction on consumer financing so that banks are discouraged to lend to unproductive sectors," BB Senior Deputy Governor Nazrul Huda said while replying to a query.

Credit flow to the private sector recorded a growth of 27.77 per cent to Tk 658.938 billion in November 2010 on a year-on-year basis compared to 16.73 per cent or Tk 340.175 billion in the same period of the previous calendar year, according to the central bank statistics.

However, the BB had set the private sector credit growth target at 16 per cent by the end of June 2011.

The BB deputy governor also said the central bank has sat with the banks, which have higher credit growth than that of deposit, separately to discuss the issue.

"Actually, the private sector credit growth was high last year," Mr. Huda said, adding that the credit flow to the private sector will come down at reasonable level if the banks maintain the existing CDR norm.

At least six commercial banks have CDR ranging between 84 and 94 per cent, instead of the standard 81 per cent, the central bank officials confirmed.

In conformity with the monetary policy stance and the financial inclusion initiative, the BB's credit policies in H2 FY11 will seek to redirect credit flows for unproductive wasteful uses into productive, employment and income generating uses.

"Supervisory vigil on lending and loan administration discipline in banks will remain stricter, lapses and laxities in lending banks will be dealt with sternly, eschewing forbearance," the BB said.

The central bank has kept broad money supply target unchanged at 15.2 per cent for FY11, which is higher considering the country's inflation and GDP growth, Deputy Governor of the BB Ziaul Hassan Siddiqui said.

"It's an accommodative monetary policy," Mr. Siddiqui said while mentioning the definitions between concretionary and neutral monetary polices.

Regarding energy prices revision, the BB deputy governor said the government will take decision on rising prices of fuel oils considering the country's macroeconomic stability. "It's not our basic task," he noted.

The first-ever monetary policy statement was formally published in January 2006 and the central bank of Bangladesh declared that it would publish it on a half-yearly basis along with a half-yearly policy review.

News: The Financialexpress / Bangladesh/ jan-31-2011

Bangladesh Bank (BB) yesterday played down links between stockmarket troubles and curbs on money market liquidity.

The central bank also defended its monetary policy and explained controls on the money flow as an “unavoidable necessity”.

"Some quarters incorrectly attributed the sharp price movements on the capital market to the liquidity situation of the money market, following the mid-December CRR (cash reserve ratio) increase," the central bank said in its second monetary policy statement (MPS) for the current fiscal year.

"Selling pressures that forced the price movements had little if anything to do with the money market liquidity," it said.

In its monetary policy announced yesterday, the central bank said, having a firmer grip on monetary expansion is an unavoidable necessity. All central banks in the neighbouring countries repeatedly hike both policy interest rates and CRR to curb inflationary pressure.

It said the investors offloading part of their existing stockholdings to raise cash for three upcoming initial public offering (IPO) subscriptions were apparently the proximate factors behind the selling pressure that triggered the price correction.

"In just one of the three IPOs, subscriptions worth Tk 2,640 crore were received against issue offer for Tk 610 crore. The few banks with capital market asset holdings beyond permissible limits were allowed extended periods to scale down [their exposure] to permitted levels gradually, and had no reason to cause abrupt selling pressure."

The BB said stability in the domestic markets is important to take the economy on a high growth path.

The policy statement said it would be important to have properly priced capital and real estate markets to avoid instability and jitters. "Overheated and overpriced markets typically collapse in crashes hurtful for all; the crashes are more painful the longer the price corrections are delayed."

"Soft landings, always hoped for, are seldom achieved. The price correction is required to be steadied and stabilised carefully."

It said while all possible support measures from all quarters are defensible in handling a crisis situation, the post-crisis capital market should move ahead on a self-sustaining path with realistic and sensible valuations.

The central bank also called upon the regulatory regime to provide sufficient safeguards against creating bubbles by unscrupulous market players.

The BB also expressed concern about the country's booming real estate market. It said: "Appropriate cooling off interventions have assumed urgency also in the overheated real estate markets, to avoid eventual painful crash."

The BB admitted challenges like slowdown in manpower exports and slow recovery in exports to traditional Western markets. It, however, said there are opportunities to take advantage of the newer markets in the fast-growing economies in Asia and elsewhere.

The statement also said the private sector has acted quickly in exploiting these opportunities, as was seen in the recent increases in exports to newer markets, and diversifying the export basket.

"Guiding hands of appropriate government policies will facilitate the initiatives of the private sector," it said.

The central bank attributed the slowdown in workers' remittance inflows to a decline in manpower exports and savings transfers by expatriates.

"During the uncertainties of the global financial crisis, workers abroad tended to send home their savings (alongside usual subsistence money for families at home). After restoration of the stability, the savings are being retained partly or wholly outside Bangladesh."

To attract these overseas savings, the government may consider revisiting the current features of Wage Earners Development Bond, and effectively promote sales of the USD Premium and Investment bonds, the central bank said.

News: The Daily Star / Bangladesh/ jan-31-2011