Rajib Zaman interviews Quazi Saifur Rahman (Right)

Merchant banks should understand that they are not dealing with a single client rather thousands of clients. Investors are the heart of these firms. I think, there is no need to force an investor to sell his or her shares.

At the same time, the merchant banks have the responsibility to protect the interests of their clients. If they did not force the investors to sell off shares, the small investors should not have returned empty handed or committed suicide, Quazi Saifur Rahman, Managing Director of Banco Finance and Investment Limited said at a discussion with ETV.

Following is the details of the discussion.

* At first, I want to know the overall condition of the share market.

# If I review the market situation for last one month, then I see it is favourable for investment. The share prices are very lucrative at present. Everyone must remember that no tax is charged for income from investment in stocks. Many companies maintain a price ratio under Taka 10. According to present ratio, one will get Taka 1 if he or she invests Taka 10. This is the net income. One has the scope to earn more profit as investment in shares is lucrative and one can avail the opportunity of earning more profit by investing for long term.

* Many people term share market as a loan market. What is your conception on this?

# I don’t agree with this. Because, the main task of merchant banks and brokerage houses is to sanction loans. They also give loans to other financial institutions and banks. Naturally, both the institutions are lenders. But, the policy of sanctioning loans of a merchant bank is different. The question for recovering loan can arise if I compare the loan given by merchant banks and other banks.

* Many people say that the market has come to a stagnant condition as margin loans were sanctioned indiscriminately. If the loans were given through proper scrutiny then the situation would not have been so. What is your opinion?

# Since 2010, the SEC interfered in sanctioning margin loans. It used to change its decision very frequently. Now, they have come to realise the adverse impacts. So, they are not interfering much on margin loans.

* Experts suggest investors to examine the fundamentals of any company before investing in shares of that company, but the market continues to fall. What is the benefit?

# We always think of day-to-day transactions. One may think why the price of the share that increased yesterday hasn’t increased today? So, they sell shares and buy new ones. This creates a panic. They should invest step by step. They should open a discretionary account to deal with merchant banks. They can lower their losses by buying shares at lowest rates.

* The number of individual investors in other countries is not so high, where there are investors-advisory services. Since there is no such service here, the loss amount is higher. What do you think?

# We are not utilising any new tools. When we get stuck somewhere, we start thinking from there – we should get away from this perennial attitude. In a meeting with the SEC, we recommended for introducing this service in an expanded way. We are not well-informed what services the merchant banks will be able to give under investors’ advisory services. The SEC should give more attention in this regard. This service can be for servicemen or for a businessman starting a new line of business. The serviceman may have a surplus income which he may spend, keep in fixed deposit or purchase land.

The investors, who are engaged in fixed investment, do not have any creativity. More discipline can be established in the capital market to attract them in share business. There are potentials of more investment through initiating investment advisory services. Not only government personnel, there are also private job holders who invest in FDRs. We can encourage them to make investments in stocks through offering secured accounts. We hope, the SEC will implement this system as quickly as possible.

Many directors of National Bank are yet to purchase the government earmarked shares. They are not giving declaration on purchase of shares. The record date has already expired.

* Question through telephone: Many advise us to purchase shares now. But we do not have that much capital. The banks are also not sanctioning loans. What can we do in this situation?

# I think, everyone should invest using ones’ own funds, not depending on loans. Generally we take loans from friends, relatives or bank loans against properties. Even, we take loan from stock market and invest. My advice is, one should invest in stocks from one’s disposable income, not taking loans. You do not need to panic and sell when the market falls.

* How do you evaluate the investment plan when one invests whole amount?

# One should always keep some funds in hands to support investment during any crisis moment. Everyone wants to secure the investment through insuring. As a result, the insurance companies take risks, but the profit is shared with the companies. I hope the concerned quarters will think about this.

* We know, finance minister ordered concerned not to press investors for forced sales when market becomes volatile. But it is followed. What is your comment?

# Firms often press investors sell off shares without considering market price. They don’t consider either an investor survives or dies. The lending firms just want to recover their loans. Everyone should understand what the capital market is? This is a long term investment market. Merchant banks should understand that they are not dealing with a client rather thousands of clients. Investors are the heart of these firms. I think, there is no need to force an investor to sell his or her shares. At the same time, the merchant banks have the responsibility to protect the interests of the clients. If they did not force the investors to sell off shares, the small investors should not have returned empty handed or suicide.

The Daily Sun/Bangladesh/ 23th Feb 2012