Finance Minister AMA Muhith has warned banks not to invest "call-money" borrowings in the stock market and blamed bureaucratic inertia for the failure by the government to offload shares of more than two dozen state companies.

Speaking a day after the steepest decline in Dhaka Stock Exchange's history, the minister said most shares are now overheated and the investors must have patience and think long term to make profit from the capital market.

Muhith rued despite his ministry's instructions, stakes in 26 state owned enterprises could not be offloaded by end of November - a move the government had promised in an effort to cool the market.

"We have set a 30-day deadline to offload those shares. It should not have been a complicated issue to offload additional shares of SOEs that have already been listed," the finance minister said in the capital.

"But those shares have yet to hit the market only due to mindset problem of some people," Muhith said, referring to the bureaucrats. He was speaking at the launching ceremony of `Bangladesh Institute of Capital Market' (BICM), a public-private training institute.

Dr. Mashiur Rahman, Economic Affairs Adviser to the prime minister was also present on the occasion.

The finance minister said investors need to show patience in the 'volatile' capital market. In spite of looking for short term profit, an investor needs to hold his shares to gain long term profit, he added.

His comments came a day after the Dhaka Stock exchange witnessed its steepest fall ever with the benchmark index shedding 547 points or 6.37 per cent in just 80 minutes of trading.

The fall set off angry protests by small investors who sniffed foul-play into the collapse. The demonstrations forced the securities regulator to postpone its two recent orders in mid-day and the market clawed back to end with the fall 1.56 per cent.

He also rejected the conspiracy theory swirling in the market that a vested quarter was out to destabilise the bourses, saying the capital market is now more strong and deep with the surge of new investors.

"During the tenure of this government, the number of investors has increased significantly and BO accounts now stood around three million," the minister said.

"So, I don't think that only a few unscrupulous investors can not destroy the country's capital market," said Mr. Muhith.

The finance minister said although investors often blame the authorities for frequent interventions, these orders are sometimes necessary for the greater interest of the market.

He said the PE (price-earning) ratio of most of the sectors had reached "dangerous level", meaning they are overpriced. Experts say a PE ratio of 16 is the standard for a financially healthy company.

But in the DSE - the country's premier bourse -- some companies' PE ratios including a few from the poor performing textile sector -- have even crossed 50, the minister said.

The finance minister strongly warned banks not to invest fund they borrow from inter-bank call money market into the bourses. "Banks should stop this practice", he said.

The finance minister said demutualization of the country's two bourses, which is essential to ensure market transparency, is likely to take place in the tenure of this government.

Economic Adviser Moshiur Rahman stressed the need for diversification of listed companies. He said most investors must be trained on the pros and cons of stock trading so that they can behave rationally.

The newly formed BICM can bridge the gap between new and intuitional investors, said the adviser.

Securities and Exchange Commission Chairman Ziaul huq Khondokar, Dhaka Stock Exchange (DSE) former president Rakibur Rahman, Chittagong Stock Exchange President Fokhruddin Ali Ahmed and Executive President of newly formed BICM were also present in the launching ceremony.

Former DSE president Rakibur Rahman said investment in good companies which have strong fundamentals can save the investors from market volatility.

"It is not expected that every day market will go up. We have seen that when our market plummets, investors stage wild demonstrations. It is not a good practice and I have not seen anything like this anywhere in the world.

He said supply of quality shares --both from private and public sectors -- can help stabilize the market.

In his concluding, speech Securities And Exchange Commission (SEC) chairman Ziaul Huq Khondker praised two former chairmen of SEC for their valuable contribution toward establishment of the BICM.

Among others Abdul Hannan Zoarder, Executive President of the newly formed BICM also spoke in occasion.

Largely, financed by Bangladesh Government, BICM will act as the premier provider of high quality practical education, training and assessment on the Bangladesh capital markets.

Initially, the BICM will offer short-term training course on capital market. Masters, M Phil and PhD courses also will be introduced in future. Initially, high officials of Securities and commission (SEC) will conduct those training programmes.

Source: The Financial Express, Bangladesh/10th Dec 2010

Despite tight monetary policy, the annual rate of inflation (12-month annual average CPI) increased to 8.12 percent at the end of September, according to Bangladesh Bank (BB) monthly economic update for November. The average inflation was 5.15 percent at the end of September last year, the report said.

According to the update, the rate of inflation on point-to- point basis also increased to 7.61 percent in September 2010 from 4.60 percent at the end of September 2009.

To combat the inflation, the central bank earlier taken some measures including raising the cash reserve ratio (CRR) to decrease money supply from banks.

The economic update, however, shows the domestic credit, particularly credit to private sector had been on rise in the past few months even after tightening of cash flow from banking sector. According to the report, the credit to private sector rose by around 26 percent in August. At the same time, export earnings and remittance also rose significantly, increasing the cash flow and eventually the inflation rate.

The report recorded 10.28 percent or US $86.14 million rise in remittance inflow in October over September's inflow of US $831.71 million. Export receipts in September amounted to US$ 1415.1 million, which is higher by US$ 354.9 million or 33.47 percent compared to export receipts in September 2009.

Sourche: The Bangladesh Today, Bangladesh/10th Dec 2010

The average inflation rate during the first quarter (July-Sept) of the current fiscal stands at 7.5 percent, Finance Minister AMA Muhith said in Parliament on Wednesday.

Placing a report in the House on the macroeconomic trend of the country in the first quarter of the current fiscal, he said that the government has taken steps to restrict additional money flow in the non-productive sector to keep the inflation rate in check. "An important pledge of the present government was to control the inflation," Muhith said, mentioning that the inflation rate of the last fiscal was 7.3 percent. He said that the process is on to control the inflation by OMS and uninterrupted supply and distribution of essential items.

In this connection, he said that money circulation increased 22.9 percent during the fiscal. "But the government is keeping its eyes on the money circulation so that the inflation could not rise further."

The Finance Minister said that the present government has fixed GDP growth at 6.7 percent for the current fiscal. In this context, the government has taken numerous steps for enhancement of investment, both public and private, infrastructure development for power, energy, communication and port, human resource development, expansion of social safety net, and social infrastructure development.

He said that the budget deficit during the first quarter of the current fiscal was Tk 2,938 crore, which is a little bit higher compared to the corresponding period of the last fiscal year. He said the export earnings during the first three months of the running fiscal increased around 30 percent compared to the same period of the last fiscal year.

The Finance Minister also mentioned that the import expenditure increased 37 percent in the first quarter, which indicated that the economic activities in the country are vibrant.

Sourche: The Bangladesh Today, Bangladesh/9th Dec 2010

The garment manufac-turers of the country demanded single digit interest rate for the sector and reducing other charges to a tolerable level so that they could attain com-petitiveness in the global market .

“The interest rate has been reduced to 13 percent from 16 percent, but the rate is still high. We recommend reducing the rate to single digit for the garment sector,” Abdus salam Murshedy, president of Bangla-desh Garment Manu-facturers’ and Entrepreneurs’ Asso-ciation (BGMEA), said while addre-ssing at a function yesterday at BGMEA Bhaban in the city.

The function was or-ganised for giving certi-ficates among the parti-cipants of a ICC workshop on ‘Incoterms-2010’.

The governor of Bangladesh Bank Dr Atiur Rahman attended the programme as chief guest while the president of International Chamber of Commerce (ICC), Bangladesh Mahbubur Rahman and chairman of ICCB Commi-ssion on Banking Tech-nique and Practice Mamun Rashid also spoke.

BGMEA president said the sector upheld its growth despite facing many challen-ges including inade-quate power supply and inefficient operation Chitta-gong port, the main sea port of the country.

“In addition to facing challenges, we started imple-menting of minimum wage for the workers which marked 81 percent increase in labour cost,” said Abdus Salam Murshedy.

He urged the BB governor to open the existing housing fund to finance the construction of the dor-mitories for the workers.

Dr Atiur Rahman assured of all-out cooperation to the garment entrepreneurs adding that “the BB will address the bank related problems of the sector.”

(Bangladesh Bank Governor Dr Atiur Rahman, seen at a workshop titled `ICC Workshop on New Incoterms 2010 & Certified Documentary Credit Specialist (CDCS)’’ organised by the International Chamber of Commerce and Industry (ICC) at the BGMEA office in the city yesterday. BGMEA president Abdus Salam Murshedy, ICC,B President Mahbubur Rahman, chairman of ICCB Commission on Banking Technique and Practice Mamun Rashid also seen. sun photo)

Source: daily-sun, Bangladesh/8th Dec 2010