Tuesday, 15 May 2012

Source: The Daily Star

 

Exports fell by 4.60 percent to $1.90 billion in April compared to a month ago due to the ongoing debt crisis in the EU and readjustment of prices of finished goods by international buyers. The debt crisis has also dampened the demand for Bangladesh's main export earner readymade garments in the Eurozone. This is one of the major causes that are pushing down the growth of exports from Bangladesh, exporters said. Also, international buyers have readjusted the prices of finished goods in line with a fall in the prices of raw materials globally. Last year, the buyers paid higher prices for finished goods as the prices of raw materials were higher then. But this year, the prices of raw materials declined and so the buyers have revised the prices of finished goods downwards, the exporters said. However, exports fell short of the monthly target by 14.23 percent in April, while such a deficit was at 15.38 percent in March, according to data released by state-owned Export Promotion Bureau (EPB) yesterday. The monthly export target for April was at $2.20 billion. Earnings fell by 7.13 percent in April, compared to the same month a year ago. Earnings from exports were recorded at $2.03 billion in April last year. This is the second straight month that the monthly earnings marked a decline in the current fiscal year. However, exports in the July-April period of the current fiscal year registered an 8.41 percent rise to reach $19.77 billion compared to the same period last year, EPB data shows. In the periodic (July-April) comparison also, the export earnings fell short of the target by 6.99 percent. The target for the period was at $2.13 billion. Bangladesh's knitwear exports rose by 2.99 percent to $7.70 billion and woven by 16.90 percent to $7.83 billion in July-April this year compared to the same period a year ago. Such rises are lower compared to the growth in July-March when knitwear exports increased by 5.92 percent to $7 billion and woven by 19.24 percent to $7.10 billion. “The decline is absolutely due to the global financial turmoil,” said Shafiul Islam Mohiuddin, president of Bangladesh Garment Manufacturers and Exporters Association, a platform of the garment makers and exporters. “If the EU debt crisis prolongs further, the exports will be affected much,” he said. The 27 countries in the EU bloc are the largest market, while the US is the single largest export destination for Bangladesh. AKM Salim Osman, president of Bangladesh Knitwear Manufacturers and Exporters Association, said the prices of per unit of knit product declined to an extent because of the fall in the prices of raw materials globally. As a result, the accumulated value of knitwear products is showing a declining trend, he said, adding that the prices of yarn and cotton came down this year. “Moreover, the knitters are taking limited orders due to power crisis in the industrial units,” he said. The commerce ministry set the export target for the current fiscal year at $26.50 billion, which is 14.50 percent higher than the amount earned in fiscal 2010-11.

Tuesday, 17 April 2012

Source: Financial Express

 

Production in the textile sector fell by around 25 per cent or 636 million metres during the first quarter of 2012 due to relaxed rules of origin criteria of the European Union (EU) and shortage of gas and electricity supply, industry people said. According to a recent survey by the Ministry of Textiles and Jute, local textile mills would produce 2,542 million metres or 40 per cent of demand until fiscal year (FY) 2009-10 against the yearly demand of 5,612 million metres. But due to the unfavourable situation, the production has been going down. The survey also said the demand of woven fabric would rise to 7,164 million metres within FY 2014-15 because of the increasing demand of local readymade garments (RMG) in the international market. Textile millers alleged that many garment manufacturers are now 'capitalising' on the new EU rules of origin and sourcing their raw materials from China, hitting the local industry hard. Lower pressure of gas and interrupted supply of electricity, depreciation of taka against dollar, and backward communicating system are also blamed for the prevailing situation. Besides, liquidity crisis in banks and higher interest of loans have also contributed to the drop in production, they said. They claimed that a considerable number of small and medium textile mills are facing closures due to the gloomy situation. Director of Bangladesh Textile Mills Association (BTMA) Engineer Ahmed Ali has expressed his deep concern over the gloomy situation of business and urged the government to take an urgent step to normalise the situation for the sustainability of the local textile mills. "Most of our mills have been failing to utilise their full capacity due to lower pressure of gas and interrupted supply of power. The millers have been utilising at best 60 per cent of their capacity for the last couple of months," Mr Ali said. "The unfavourable business situation has brought down our production to around 1,900 million metres or 25 per cent less then the previous production which has pushed the cost of our produce high and is making our millers less competitive in the international market," he added. Mr Ali said, "Many RMG exporters are cashing in on the relaxed rules of origin, procuring Chinese-made fabrics, neglecting local quality fabrics." Director of Argon Denims Ltd A K Gouhor Rabbani said, "Liquidity crisis in banks and high interest rate on bank loan have also played a vital role for the poor performance of the textile mills." "Previously the banks would charge around 10 to 12 per cent interest on their funds, but now the effective rate of interest comes to about 24 per cent. Can you tell me how we will compete in the international market with such a higher interest?" Rabbani questioned. Mr Rabbani added, "We do not want incentive if the government can ensure smooth infrastructural support and a single-digit bank interest on loans." Mr Rabbani also said, "Any kind of setback of the textile industry will affect the livelihood of hundreds of thousands of people of the country." He expressed the fear that if the situation does not improve, it might also make the country's RMG industry less competitive in the international market and would hamper its growth. BTMA President Jahangir Alamin said that the association is in continuous dialogue with the government to resolve the problem. Following the survey report by the ministry, the government later on has decided to increase local production of woven fabrics up to 3,924 metres or of 55 per cent of total demand through installing new and modern mills across the country. Rest of the demand the country would be fulfilled through imports.

Tuesday, 17 April 2012

Source: Financial Express

 

The country's overall trade deficit widened by over 17 per cent to US$ 5.701 billion in the first eight months of the current fiscal year (FY '12) following higher import of petroleum products, officials said Monday. "Higher import of fuel oil has widened the overall trade deficit during the period under review. But it might ease slightly in the coming months because of a falling trend in import of food grains along with unnecessary luxury items," a senior official at Bangladesh Bank (BB) told the FE. The overall trade deficit rose to $ 5.701 billion in July-February of the FY '12 from $ 4.859 billion during the corresponding period in the previous fiscal, according to the central bank statistics. During the period, export earnings stood at $ 16.006 billion against the import payments of $ 21.707 billion. Import of food grains such as rice and wheat, in terms of settlement of letters of credit (LCs), witnessed a negative growth of 36.83 per cent to $ 704.01 million in the period from $ 1.11 billion of the corresponding period last fiscal. The import of fuel oils increased by 49.63 per cent to $ 3.00 billion in the first eight months of FY '12 from $ 2.00 billion of the same period in the previous fiscal, the BB data showed. The central banker also said the BB has already advised the commercial banks to make credits available to the priority sectors, including the productive ones, in line with the newly announced monetary policy. On January 26 last, the BB unveiled a 'restrained' monetary policy aiming to bring down inflation to single-digit from the current level of over 10 per cent through discouraging credit flows to unproductive sectors. The country's current account balance decreased by nearly 32 per cent to $ 681 million in the period under report from $ 999 million in the same period of the previous fiscal. However, the overall balance of payments (BoP) has recorded a deficit of $ 516 million during the period under review from $ 222 million in the corresponding period in the previous fiscal. The overall BoP entered the negative territory in FY '11 after a decade due to widening of the trade gap, lower growth of remittances and deficit balance in the financial account.

Monday, April 9 2012

Source: Financial Express

The central bank has approved six more private commercial banks (PCBs), aiming to help strengthen the ongoing financial inclusion programmes through bringing unbanked people under the banking network, Bangladesh Bank (BB) officials said. The decision came at a meeting of the BB's board of directors, held at its central office Sunday, with BB Governor Atiur Rahman in the chair. The six approved PCBs are: Union Bank Limited, Modhumoti Bank Limited, the Farmers Bank Limited, Meghna Bank Limited, Midland Bank Limited and South Bangla Agriculture and Commerce Bank Limited. "The board has approved the six PCBs after a thorough scrutiny of all 16 short-listed applications one by one," Deputy Governor of the BB SK Sur Chowdhury told reporters after the meeting. He also said the board has also decided to issue letters of intent (LoI) to the approved six PCBs, giving them a period of six months to comply with the existing rules and regulations for setting up new commercial banks. "We'll issue licenses to the PCBs after their proper compliance with all conditionalities," Mr. Sur said, adding that loan defaulters and tax evaders would not be allowed to be the directors of new banks. The proposed chief executive officers (CEO) of the approved PCBs will have to present their business plan before the board, he said while explaining the conditionalities for the new banks. The authorities concerned of the approved PCBs will have to deposit the amount of their paid-up capital worth Tk 4.0 billion with the central bank, before starting their operation, the BB deputy governor added. "All the applicants are Bangladeshi citizens. The BB board has considered those who were found eligible, based on their qualifications," he said replying to a query if the approvals were given only to Awami League (AL)-affiliated people. The proposed chairmen of newly-approved banks are: Union Bank Limited -- Shahidul Alam, Modhumoti Bank -- Humayun Kabir, Farmers Bank -- Dr Mohiuddin Khan Alamgir, Meghna Bank -- AHN Ashiqur Rahman MP, Midland Bank -- Moniruzzaman Khandker and South Bangla Agriculture and Commerce Bank -- SM Amjad Hossain. "Since bank licences were last issued in 2000-01, there have been many significant developments in the Bangladesh economy," the central bank said in a statement, explaining the economic context and rationale behind issuing new bank licences. The economy has grown and the banking system has become more competitive but there are still a large number of under-banked people in Bangladesh, the BB added. Recent estimates from a survey conducted by the Institute of Microfinance found that only 45 per cent of the nearly 9000 households surveyed do have access to banks and micro-finance institutions (MFIs) for loans. The population per branch (21065) and the ratio of loan accounts per 1000 adults (42) suggest that the outreach of the formal financial sector in Bangladesh is lower than that in India (14485 and 124 respectively) and Pakistan (20340 population per branch and 47 loan accounts per 1000), according to the statement. "As such, the new banks will help increase the quality of banking services by increasing competition in the banking sector. They will also be able to meet the unfulfilled demand for credit by the private sector whose needs have grown in line with a fast expanding economy," it noted. Moreover, for new banks the ratio of opening rural and urban branch will be 1:1 which will help increase bank branches in rural areas and improve financial inclusion, the central bank said. Earlier, 37 applications were submitted to the central bank for setting up of new PCBs. Of them, 21 were rejected by a preliminary scrutiny committee mainly due to lack of necessary papers and documents. Last Thursday, the central bank approved three new commercial banks sponsored by non-resident Bangladeshis (NRBs) to help boost the inflow of foreign exchange. Currently, a total of 47 commercial banks are in operation in Bangladesh.

Thursday, April 5, 2012

Source: Financial Express

 The central bank has approved three new commercial banks sponsored by non-resident Bangladeshis (NRBs) on the condition that those would contribute to boosting the inflow of foreign exchange, officials said. The decision came at a meeting of the board of directors of Bangladesh Bank (BB), held at its central office Wednesday, with BB Governor Atiur Rahman in the chair. The three approved NRB banks are: NRB Commercial Bank Limited, NRB Bank Limited and NRB Bank Limited. The name of one NRB Bank will require to be changed. The meeting of the BB board has, however, been adjourned until 1:30 pm on April 8 (Sunday) for taking the final decision on approval of other private commercial banks (PCBs), sponsored by local entrepreneurs. "The board will take the final decision on other PCBs Sunday next after a thorough scrutiny of applications one by one," Deputy Governor of the BB SK Sur Chowdhury told reporters after the meeting. He also said the board approved three NRB banks, imposing conditions relating to their contributions to international trade and inward remittance. "The approved NRB banks will have to play a strong role in selling of foreign currency treasury bonds abroad," Mr Chowdhury said adding that the government is now planning to float sovereign bond which will be sold by the NRB banks in the overseas markets. Farasat Ali and Nizam Chowdhury, now living in the United States, have applied for the NRB Commercial Bank and NRB Bank respectively, as chairmen. Another applicant, Iqbal Ahmed, who is residing in the United Kingdom, has applied for a bank, also named as NRB Bank with himself being its chairman. "We'll ask the entrepreneurs to change the name of an NRB bank since two applications were approved with the same name. But the name of sponsors will remain unchanged," the BB deputy governor said while replying to a query relating to two NRB banks bearing the same name. The new NRB bank will be established with a paid-up capital of not less than Tk 4.0 billion. The shareholding of the NRB bank will be 50 per cent from the NRB sponsors and the rest 50 per cent will be collected through public offerings. "The authorities concerned of the approved NRB banks would have to deposit the amount of their paid-up capital with the local commercial banks in foreign currency," another BB official said, adding that the central bank will issue licences to the NRB banks, only after receiving their money against the paid-up capital. "The letters of intent will be issued to the approved NRB banks by the end of next week, after approval of the minutes of the board meeting," the central banker said, adding that the NRBs may play a pivotal role in further deepening of the operations in the country's financial sector by extending their valuable contributions. Each sponsor of the NRBs will have to hold a minimum stake of Tk 100 million in the holding of shares and the maximum stake will be 10 per cent of the bank's total paid-up capital. The central bank earlier decided in principle to grant licence to a new banking company to be set up by NRBs, in pursuant to section 31 of the Bank Company Act, 1991, after considering the need and overall strategy that is congenial to the pursuit of an effective monetary policy for the country's financial sector. The BB sought amplifications from the interested entrepreneurs for setting up of NRB banks on March 7 last year. The last date for submission of applications was May 31, 2011. After scrutiny by three committees of the central bank, three of the five applications were considered for setting up of the proposed NRB banks. The board could not complete the analyses of all the 16 short-listed applications for setting up of new PCBs, a BB senior official said, adding that the names of 19 proposed commercial banks, including three NRB banks, were placed before the board at its meeting on Wednesday, for final approval. Earlier, 37 applications were submitted with the central bank for setting up of new PCBs. Of them, 21 were rejected by a preliminary committee, mainly due to lack of necessary papers and documents.

Wednesday, 4 April 2012

Source: The Daily Star

The Securities and Exchange Commission yesterday gave its nod to an amendment to the merchant banker and portfolio manager rules. The stockmarket regulator at a regular weekly meeting approved the modification in the rules after scrutinising public opinion on the amendment, the SEC said in a statement signed by its Executive Director Saifur Rahman. The SEC will soon publish a gazette notification on the modified version of the rules. Earlier on February 20, the regulator approved the draft amendment to the rules, allowing them to raise their paid-up capital. The paid-up capital of a full-fledged merchant bank will be Tk 25 crore, instead of the existing Tk 10 crore, according to the amendment. The paid-up capital of a merchant bank with only one underwriting licence will be Tk 2.50 crore, instead of Tk 1 crore now, while the capital of a merchant bank with only one issue management licence will be Tk 12.50 crore instead of Tk 5 crore, as per the amendment. The merchant banks will have to fulfil the paid-up capital requirements within a year of publishing the gazette on the amendment. Presently, there are 43 full-fledged merchant banks in Bangladesh, while one holds the issue management, underwriting and portfolio management licence, and two others have the issue management licences. Yesterday's meeting, presided over by SEC Chairman Prof M Khairul Hossain, also warned Union Capital Ltd, an issue manager, as it submitted draft IPO (initial public offering) prospectus of Padma Islami Life Ltd without mentioning some important information. However, the SEC later approved Padma Islami's IPO prospectus with the missing information. The regulator at the meeting also extended the time for submitting the draft IPO prospectus of Padma Islami Life 1st Mutual Fund by six months.

Saturday, 31 March 2012

Source: Financial Express

 

Bangladesh is going to emerge as the next hot spot for the apparel buyers from across the world as it offers competitive prices and has also upgraded its production capacity, said the leading buyers in USA and Europe. The European and US RMG (ready-made garment) buyers have plan to expand the share of their sourcing from Bangladesh to 25 to 30 per cent by 2020, from the current average of 20 per cent, said a survey by McKinsey & Company. The US-based global management consulting firm McKinsey has conducted the survey among the chief purchasing officers (CPOs) of the leading RMG buyers in the US and Europe who are preferring the products from Bangladesh to that of China and the Southeast Asian countries. The McKinsey survey found that 86 per cent of the CPOs in the leading apparel companies in Europe and the United States planned to decrease the levels of sourcing in China over the next five years because of declining profit margins and capacity constraints. "Although Western buyers are evaluating a considerable number of sourcing options in the Far East and Southeast Asia, many chief purchasing officers said in the survey that they viewed Bangladesh as the next hot spot," the report mentioned. "Indeed, our study of the Bangladesh's RMG industry identified solid apparel-sourcing opportunities there-but also some hurdles," the McKinsey report added. In 2010, China dominated European and US markets for RMG, accounting for about 40 per cent of the import volume in each region. On the other hand, RMG is the Bangladesh's most important industrial sector with nearly $15 billion exports in 2010, representing 13 per cent of total gross domestic products and nearly 76 per cent of total export earnings. The global management consulting firm McKinsey forecasts that export-value growth of 7.0 to 9.0 per cent annually within the next ten years will double the market size by 2015 and it will be nearly tripled by 2020 in Bangladesh. The survey of CPOs found that the European and US companies focus on the apparel market's value-segment plan to expand the share of their sourcing from Bangladesh within the range of 25 to 30 per cent by 2020, from an average of 20 per cent now, the global firm said. The mid-market brands, which generate about 13 per cent of their sourcing value in Bangladesh, plan to increase that share to 20 to 25 per cent over the same period, it added. While growth in the current product categories will drive some of the increases, 63 per cent of the CPOs said that they wanted to expand into more fashionable or sophisticated items, such as formal wear and outerwear. "In our study, all the respondents identified attractive prices as the most important reason for purchasing in Bangladesh. They also said that price levels there will remain highly competitive in the future, since they expect significant efficiency increases to offset rising wage costs," McKinsey said. "Half of the respondents mentioned capacity as the second-biggest advantage of Bangladesh's RMG industry," the survey report mentioned. With 5,000 factories employing about 3.6 million workers (of a total workforce of 74.0 million), Bangladesh is clearly ahead of other Southeast Asian suppliers in this respect. It also offers satisfactory levels of quality, especially in value and entry-level mid-market products. The McKinsey and Company, however, identified five challenges for Bangladesh's RMG sector including poor infrastructure, inadequate skilled manpower, political instability, lack of adequate raw materials and compliances at the factories. The global firm suggested that the three main stakeholders -- the government, the suppliers, and the buyers -- work together to realise the potential of Bangladesh's RMG sector. The global management firm said transportation bottlenecks create inefficient lead times for garments and delay deliveries to customers. "This issue will become even more important in the future, since buyers want to source more fashionable products with shorter lead times." "Energy supply is a concern, too -- 90 per cent of the more than 100 local suppliers we interviewed rate it as poor or very poor. The government has prioritised improvement in this area and started to upgrade power systems over the last two years, however," the global management consultancy firm said. On the compliance issue, most of the European and US chief purchasing officers said in the survey that standards have somewhat or strongly improved over the past five years. They noted that suppliers vary greatly in their degree of compliance. "Our study found that the suppliers' productivity must improve not only to mitigate the impact of rising wages, but also to close gaps with other sourcing countries and to satisfy new customer requirements for more sophisticated products. "Two other concerns are a lack of investment in new machinery and technologies and the insufficient size of the skilled workforce, particularly in middle management," the US-based global management consulting firm said. It observed that Bangladesh lacked a considerable supply of natural or artificial fibres, and its dependence on imports creates sourcing risks and lengthens lead times. "Compounding the problem is the volatility of raw-material prices over the past few years. The development of a local sector would improve lead times," it noted. About half of the chief purchasing officers interviewed stated that they would reduce levels of sourcing in Bangladesh if its political stability decreased, the McKinsey survey said. The survey found that political unrest, strikes, and the ease of doing business were at the top of the mind of the respondents. In the last fiscal 2010-11, the RMG sector, including knitwear, woven and home textiles, has fetched US$ 18.71 billion, out of the total US$ 22.93 billion export earnings of the country, the Export Promotion Bureau data showed.

Thursday, 29 March 2012

Source: The Daily Star

 

Mobile operators will get technology neutral spectrum licenses for high-speed internet operations through an auction in September this year. The auction will begin with a floor price of Tk 240 crore for per Megahertz airwave in 2,100 band to award five licenses, according to draft guidelines prepared by the telecom regulator. The regulator -- Bangladesh Telecommunication Regulatory Commission (BTRC) -- yesterday sent the guidelines to the telecom ministry which will finally decide on the floor price, design of the auction and other criteria. Due to the technology neutral spectrum licences, the operators will be able to go for either 3G or 4G operations, said BTRC Chairman Zia Ahmed. Three licences have been suggested for the existing five private operators, while one is for a possible new entrant and the other is for state-run Teletalk, said Ahmed. However, if the new entrant does not take the licence, an existing local operator will get it, he added. The BTRC chairman said 50 Megahertz from 2,100 Megahertz band (2110 Mhz to 2160 Mhz) has been selected for auction. Each of the winning companies will be given 10 Megahertz spectrum, which the BTRC chairman said is enough to roll out the service, as India has provided 5 Mhz for 3G operations. In technical terms, 3G is called HSPA (high speed packet access), while 4G is termed as Long Term Evolution. Both the technologies can provide high speed internet services through wireless, while the LTE is the latest and can transfer data more efficiently than the HSPA. The floor price for per Megahertz spectrum will be Tk 240 crore ($30 million) and the difference between each call will be $.5 million at the auction, Ahmed said. The regulator has suggested the floor price of the auction on the basis of the experiences of 2G licence renewals for mobile operators in Bangladesh and the 3G auction in India. Grameenphone has given almost Tk 240 crore for per Mhz spectrum to renew its 2G licence, and so the amount of the floor price is not very high, said the BTRC chairman. There should be minimum two participants in the auction. The BTRC will try to telecast the auction live, said Ahmed. The payments will be made in US dollars, while local shares of the company will be given in local currency.

Tuesday, 27 March 2012
Source: The Daily Star

When I tell people in Hong Kong, London or New York that Bangladesh is a land of untapped business opportunities, there are usually some who'll raise their eyebrows in incredulity or admiration. For those who haven't visited in person, it's a country they only know from media headlines as a place of natural calamities and social pressures as the population expands. Fortunately, I'm finding that the sceptics and uninformed are increasingly in the minority. As the global business community focuses its attention on Asia, there's mounting interest in Bangladesh for its skilled workforce, its thriving economy and the impressive export industry it's built in just over 40 years. While acknowledging that Bangladesh still has much to do to realise the government's long-term vision, I believe the prospects here are quite bright. So does HSBC Commercial Banking, which handles over 8 percent of the country's international trade, and which recently showed Bangladesh to be the Asia-Pacific's second fastest-growing trade partner after Vietnam. In fact, our research indicates that Bangladesh's regional commerce will increase by more than 9 percent annually through to 2016. Our confidence stems from what we see on the ground, in the cities and in the export processing zones, and from our expectations that Asia will increasingly sit at the heart of the global economy. Bangladesh now ranks higher than India, Indonesia and the Philippines in the World Bank's 'Doing Business' report, and it has nurtured companies producing goods for household brands including Levis, Nike, Raleigh and Sony. Some have suggested that Bangladesh could become like Mexico, which has established itself as a low-cost manufacturing hub for its enormous neighbour to the north. In some ways the analogy is insufficient in that Bangladesh borders India and is also close to China - two economies HSBC thinks will become the world's third-largest and largest respectively by 2050. In other ways, the analogy exaggerates because by 2050, even after a seven-fold increase, we expect China's income per capita will only be 32 percent of that in the US. What we know today is that Bangladesh is a competitive place to do business when benchmarked against its emerging market peers. It has clear cost advantages, and a committed young workforce that's keen to learn. With an increasing number of international companies relying on Bangladesh for the timely delivery of quality garments, the country has a medium-term opportunity to win manufacturing investment in this vital export sector. With economic austerity in the West making consumers there more cost-conscious, companies here have an opportunity to promote sales of affordable clothing while investing to rise up the value chain. The challenge, of course, is that Bangladeshis want to increase their earning power. They want economic diversification that will bring new job opportunities while reducing the nation's reliance on apparel and expatriate remittances. This will require effort to build the infrastructure businesses need to capitalise on Bangladesh's location, and it will require effort to attract new industries and the skills transfer that comes with them. Though the garment industry is likely to provide the backbone of the economy for some time to come, it's encouraging to see that companies making goods as diverse as camera lenses, shoes, mobile phone components and car parts have chosen to set up plants in the EPZs. Local entrepreneurs and investors from Canada to Taiwan are starting to recognise Bangladesh's potential as a location for light engineering, shipbuilding, agro-processing, pharmaceuticals and ICT. Samsung's recent opening of a research and development centre in Dhaka is a good case in point. Like many local businesspeople, HSBC is watching with great interest as the governments of India and Bangladesh negotiate greater access to each other's road, rail, sea and air transport networks. For India, a deal will improve domestic links to its north-eastern states. For Bangladesh, it could help the country become a regional centre for trade and manufacturing, a gateway to the sea for Nepal and Bhutan, and the hub of a trans-Asia highway connecting India to China and South-East Asia. Looking eastwards, Bangladesh is positioning itself to boost trade with China as China rebalances its economy from exports to sustainable domestic demand. Last year, HSBC helped a customer in the Dhaka EPZ to buy yarn from China in Chinese Renminbi. This deal was another sign of things to come, as Bangladeshi firms seek to cement relationships with Chinese partners, cut transaction costs and hedge foreign exchange risk in what is set to be the next global currency. Clearly, I have to be balanced in my conversations with overseas companies. Bangladesh must ensure power supplies and communications networks are robust, for example, and it must recognise the competitive strengths of neighbours such as Vietnam, Cambodia and Pakistan. As I also tell them, however, it's clear to me that there are few people who can match Bangladeshis for their resilience in the face of a challenge. If this country continues to reinforce its links with the developed world, while deepening relationships in the emerging markets, it has every reason to demand attention in biggest corporate boardrooms.

Tuesday, 20 March 2012

Source: Financial Express

 

A total of eight new commercial banks, including three non-resident Bangladeshi (NRB) banks, may get approval at the next board of directors' meeting of BangladeshBank, sources said. The meeting is likely to be held on March 27 for taking the final decision on allowing new private commercial banks (PCBs). Sources close to the decision-making level, however, did not mention the names of all the new scheduled banks, but they hinted that the whole thing would be based on the desire of the "high-ups in the government". Names of the three proposed NRB banks -- NRB Commercial Bank Limited, NRB Bank Limited and NRB Bank Limited -- were placed before the board on March 15 for approval, but no final decision was taken at that meeting. "The country will receive around US$ 150 million as paid-up capital, in aggregate, from the NRB banks if the board gives them its approval," a source said, speaking in favour of allowing the three NRB banks. The foreign currency thus obtained will help improve the country's foreign exchange reserve position, he said, adding that the NRB banks would also help in attracting foreign direct investment (FDI), particularly from the NRBs across the world. "We're now working on holding another board meeting by the end of this month," an executive director of Bangladesh Bank (BB) told the FE, adding that the board would take the final decision on approval of the new banks, both PCBs and those involving NRBs. The BB executive director did not specify the number of banks to be approved at the board meeting. Meanwhile, the preliminary scrutiny of all 16 applications selected for establishing the new PCBs was almost completed Monday, another central bank official said. A four-member technical evaluation committee, headed by general manager of the Foreign Exchange Policy Department of Bangladesh Bank -- Ahmed Jamal, was earlier formed to examine the primarily selected applications from persons seeking to set up new PCBs. "The technical evaluation committee will submit a report with scores of all applications to the application evaluation committee within a couple of days for giving it a final shape," the central bank official said. Another four-member separate application evaluation committee, headed by Senior Deputy Governor of BB Abul Quasem, has already been formed to finalise the evaluation report on the applications. "The report relating to the setting up of new commercial banks will be placed before the next board meeting for final approval," the BB official said without elaborating. Earlier, 37 applications were submitted with the central bank for setting up new PCBs. Of them, 21 were rejected by a preliminary committee due mainly to the lack of necessary papers and documents. Currently, a total of 47 commercial banks are in operation in Bangladesh.

Monday, 19 March 2012

Source: The Daily Star

 

Foreign investments in the Dhaka stock market increased 27.96 percent in February, compared to a month ago, as foreign fund managers now consider the market lucrative for long-term investment due to low prices of fundamentally strong stocks. The present situation of the market is suitable for long-term investment as the stock prices of many of the fundamentally strong companies have come down, said a foreign fund manager. However, he stressed political stability, improvement in power and infrastructure, macroeconomic equilibrium and foreign investors-friendly policies to attract more investment into the country. Foreign investment in the stockmarket rose by Tk 33 crore in February from Tk 118 crore in January. Md Saifuddin, managing director of IDLC Securities Ltd, said: “Foreign investment marked a rise as the investors think that this is the right time to invest in the Bangladesh's stockmarket and the market is lucrative for long-term investments.” Foreign investment was slow in September, December and January as the market experienced a number of downswings and the investors adopted a wait-and-see policy then, Saifuddin said. He said foreign fund managers opt for big market cap stocks, and consider the corporate declaration trend of a company and its management to take investment decision. The fund managers also want see good auditors perform auditing for the companies before making their investment decision, he said. The foreign investors bought shares worth Tk 1,216.83 crore, while sold shares worth Tk 1,138.40 crore last year, according to DSE statistics. In 2010, the amounts were Tk 1,079.15 crore and Tk 1,755.74 crore. Saifuddin said the account opening process for the foreign fund managers should be made easier and trading infrastructure should be friendly to increase their participation in Bangladesh. Foreign investors have a lack of information on good stocks due to a dearth of quality research in Bangladesh, he said. Saifuddin also said the custodian banks of most of the foreign fund managers have no membership of clearing house of the stock exchanges. As a result, local brokers take risk of settling trade of the foreigners, he added. Free funding cost of the foreign fund managers is also an obstacle to increasing foreign investment in Bangladesh as it raises investment cost for them, said the IDLC boss. He said foreign portfolio investment in Bangladesh is very low compared to other countries in Asia. IDLC Securities is one of the leading portfolio managers that give stock brokerage services to foreign fund managers. Goldman Sachs, an international asset management firm based in the USA, invested in Bangladesh through IDLC.

Monday, March 12 2012

Source: Financial Express

The National Board of Revenue (NBR) has reintroduced the tax rebate facility at the rate of 10 per cent on investment in listed issues with the stock exchanges for investors in the secondary market. From the current month, investors in both initial public offerings (IPOs) and in shares, mutual funds and debentures in the secondary market can enjoy this tax rebate as investment allowance. Under one of three separate Statutory Regulatory Orders (SROs) issued by NBR on Sunday, this investment allowance has been allowed. The NBR scrapped the facility for secondary market investors in the original budget for current fiscal. It has now re-introduced the tax rebate, following demands made by the investors. "Any sum invested by an assessee, being an individual, in the acquisition of any stocks or shares of a company, mutual fund or debenture listed with any stock exchange," the SRO said. The NBR also issued a SRO offering tax exemption for foreign investors from capital gains. Public limited companies, owned by foreign or non-resident Bangladeshis, can enjoy tax exemption facility on capital gains made through investments in the listed stocks. The NBR imposed 10 per cent capital gains tax on foreign investors in the original budget for fiscal year (FY) 2011-12 which has been withdrawn through Sunday's SRO. Foreign investors can enjoy the tax exemption facility if they enjoy a similar one in their respective country of origin. "Any profit and gains under the head 'capital gains' arising from the transfer of stocks or shares of a company as defined in company law, 1994 listed in any stock exchange in Bangladesh of an asssessee being a non-resident, subject to the condition that such assesses is entitled to similar exemption in the country in which he is a resident," the SRO said. The NBR also issued a separate SRO on alternative dispute resolution (ADR) rules. The law on ADR law was enacted during the time of the approval of the Finance Bill and the Appropriations Bill, i.e., the passage of the national budget, for the current fiscal. Under the ADR rules, the NBR set 30 days time, on receipt of demand notice from the taxmen, by the taxpayers to submit application for resolving disputes through ADR process. Taxpayers will have to pay Tk 500 with the application for a tax year. There will be facilitators to help both taxmen and taxpayers on ADR process. Facilitators will get remuneration, which will be 10 per cent of the disputed tax amount but not below Tk 5000 and not above Tk 50,000. Both taxpayers and government or government-appointed organization will equally share the amount to be paid as remuneration.

Sunday, 11 March 2012

Source: The Daily Star

Investors will now be able to take advice from professionals on how to invest wisely in the stock market. The Securities and Exchange Commission (SCE) has drafted two new rules on “investment advisory services” and “equity research” in an effort to develop a rumor-free market and to help investors reduce risks. With these rules, investment advisory services are going to be allowed, while research firms will be able to publish and sell equity research to investors on a commercial basis, which was prohibited earlier. After approving the draft rules at a meeting last week, the stock market regulator sought public opinion to finalize the rules. “It is commonly believed that there are thousands of investors in Bangladesh who have inadequate knowledge about the stockmarket and invest in the market influenced by rumours,” said an SEC official. If investors follow the suggestions, their investment risks will reduce, he said. “The rules on research will compel the institutions and brokerage houses to appoint professional, efficient and experienced investment managers.” The rule on investment advisory services will be titled 'Securities and Exchange Commission (Investment Adviser) Rules, 2012'. In line with the rules, no individual or institution will be allowed to provide investment advices without having a licence from the SEC. An individual seeking to become an investment adviser must be 30 years of age and should have relevant academic or professional qualification. In addition, he or she must have at least five years of experience in the securities market, including three years as a portfolio manager. An institution seeking an advisory licence from the SEC must have Tk 25 lakh in paid-up capital and net worth should be equivalent to half the paid-up capital for all time. Investment advisers will provide research- and material information-based advice to their clients on a contract basis. Advisers should not give any rumour-driven advice. An adviser can take responsibility of an investor, but before that, the adviser should assess the client's investment related conditions, objects and experience. An adviser will not share or disclose a client's portfolio information to others. The second rule will be styled as 'Securities and Exchange Commission (Research Analysis) Rules, 2012'. In line with the rule, merchant banks, stockbrokers, stock dealers, asset management companies and independent research firms will be eligible institutions to publish research reports on listed securities. But the institutions must have a separate research team comprising at least three members, including a head of research. Any person seeking to become a research analyst must have relevant academic or professional qualification. Besides, the analyst must have at least three years of experience in the capital market or any related financial organisation, while the head of research must have five years of experience. The research staff must exercise diligence, independence and thoroughness in analysing securities and making investment recommendations. They must have reasonable and adequate basis supported by appropriate research and investigation, for any investment analysis, recommendation or action.

Thursday, 23 February 2012

Source: The Daily Star

The finance ministry has instructed government officials and institutions not to take any decision or comment on the stock market without prior discussion or consultation with the Securities and Exchange Commission. All market-related decisions that could influence the market must be discussed with the regulator, according to a circular issued by the finance ministry. “The capital market is known worldwide as a sensitive market. Bangladesh's capital market is also very sensitive,” the finance ministry said. “The capital market might be influenced or destabilized due to statements and comments on the stock market by different individuals, institutions and organizations without being well informed about the share market.” The finance ministry identified eight areas on which no government institution or individual can take a decision or make comments. The areas include listing of state enterprises or offloading government stakes in other companies; explanation and analysis of a tax proposal in the national budget. Statutory regulatory order (SRO) or policy by the National Board of Revenue; and any SRO or policies by the central bank on the capital market were also included. Other areas include policies on market stakeholders or investment in the market by employees of government or semi-government or autonomous institutions; perception-based comments, instead of information-based, in the media; and any initiative on the capital market by an individual or institution. “The government's instruction to empower the SEC is a sign of its seriousness in stabilizing the market,” said Prof Helal Uddin Nizami, senior member of SEC.

Thursday, 23 February 2012

Source: Financial Express

The central bank has extended the timeframe of assured liquidity support (ALS) for the primary dealers (PDs) by 15 days to increase the cash liquidity in the market, officials said Wednesday. Under the new provisions, the PDs are allowed to enjoy liquidity support against both success and devolved securities for a maximum of two and half months at a stretch fromthe date of issue of the government approved securities instead of two months. "We've extended the liquidity support to the PDs considering the overall market situation," Executive Director of the Bangladesh Bank (BB) Sudhir Chandra Das told the FE. He also said some Tk 10 billion-Tk 15 billion will be injected into the market as per the new provisions relating to ALS. The central bank issued a directive in this connection Wednesday and asked the chief executives of all PD banks and financial institutions to follow the latest provisions of the ALS. The central bank provided Tk 63.82 billion on the day to 13 PDs for one-day tenor as the liquidity support facility to meet their cash liquidity demand, according to the central bank statistics. The PDs welcomed the central bank's latest move, saying that it would help them to meet the growing demand for cash liquidity to some extent. "We had earlier requested the central bank to extend such liquidity facility for a maximum of at three months instead of two months," a senior member of the Primary Dealers Bangladesh Limited (PDBL) told the FE. He also said 12 PD banks are now holding government securities worth around Tk 180 billion in excess of their statutory liquidity ratio (SLR) requirement with the central bank. "The PDs have to comply with holding of the government securities against their underwriting obligation to the BB," the PDBL member said explaining the reason for holding the excess securities. He also said normal banking business of the PDs is being seriously hampered due mainly to immense underwriting obligation relating to the government securities. "Our short-term and long-term business growth plans are being hampered seriously due to substantial growth of the government securities," he said, adding that it's also creating problems in cash liquidity and cash flow forecast that, in turn, is also affecting day-to-day operational and investment activities. The central bank earlier selected 15 PDs - 12 banks and three non-banking financial institutions (NBFIs) - to deal with the government-approved securities in the secondary market. The PDs are required to subscribe and underwrite primary issues and can make secondary trading deals with two-way price quotations. But the secondary market in the country for such bonds and securities has not been developed yet and the volume of trading in such a very rudimentary market is very insignificant now.

Wednesday, 22 February 2012

Source: Financial Express

 

The securities regulator has moved to pave the way for expanding the capital base of merchant banks as part of the medium-term measures announced in the stock market rejuvenation package, officials have said. The Securities and Exchange Commission (SEC) Monday decided to revise the Merchant Banker and Portfolio Manager Rules, 1996 and also made a proposal to re-fix the minimum amount of the paid-up capital of the merchant banks. The regulator has also approved the initial public offering (IPO) proposal of Amra Technologies and another proposal of Mithun Knitting in taking over two other companies. The approval came at a commission meeting, chaired by SEC Chairman Professor M Khairul Hossain.As per the SEC proposal, the minimum paid-up capital of a merchant bank, which performs the function of an issue manager, will be Tk 25 million instead of the existing capital of Tk 10 million. On the other hand, the minimum paid-up capital of the merchant banks, which perform the functions of either underwriters or portfolio managers, will be Tk 125 million, instead of the existing capital worth Tk 50 million.And the minimum paid-up capital of a full-fledged merchant bank will be Tk 250 million instead of a capital worth Tk 100 million. Presently, there are 49 merchant banks that have been performing their authorised functions in the country's stock market. Among the banks, 43 are the full-fledged merchant banks, which simultaneously perform the functions of an issue manager, a portfolio manager and an underwriter. The remaining six merchant banks carry out the functions of either an issue manager or a portfolio manager or both. The securities regulator will soon seek public opinion on its proposal of re-fixing the minimum paid-up capital of the merchant banks. The banks will have to fulfill the conditions of paid-up capital within a year of publishing a gazette notification on the issue.

Wednesday, 15 February 2012

Source: The Daily Star

 

The Securities and Exchange Commission yesterday approved the IPO prospectus of Unique Hotel and Resorts Ltd, the owner of The Westin Dhaka, to raise Tk 195 crore from public. The approval came at a meeting of the stockmarket regulator with SEC Chairman Prof M Khairul Hossain in the chair. Using the fixed price method, Unique Hotel will float 2.60 crore ordinary shares of Tk 10 each at an offer price of Tk 75, including Tk 65 as premium. With the IPO (initial public offering) proceedings, the company will set up three new hotels and repay bank loans. As per financial statements of 2010, earnings-per share of Unique Hotel, whose existing paid-up capital is Tk 230 crore, is Tk 5.18, while net asset value per share is Tk 100.38. Set up in 2007, The Westin Dhaka has emerged as one of the leading five-star hotels in the capital. After listing, it will be the first private sector listed hotel in Bangladesh stockmarket. Presently, the two state-owned entities -- Bangladesh Services and Bangladesh Hotels -- are listed with the Dhaka Stock Exchange. Bangladesh Services owns Dhaka Sheraton and Bangladesh Hotels owns Purbani International. The SEC at yesterday's meeting also approved the amendment to corporate governance guideline. The commission will now publish the revised guideline in national dailies and post on its website for public opinion. The market regulator also formed a two-member committee to formulate a guideline on the uses of IPO proceedings. The regulator asked the committee, which comprises two executive directors of the SEC -- Farhad Ahmed and ATM Tariquzzaman, to submit a report to the commission within the next five working days. The market watchdog also decided to make it mandatory for the companies that will raise their capital from foreign sources or institutions to obtain permission or no objection certificate from the central bank. The commission also instructed Delta Spinning Mills, a listed firm, to disburse dividends to 285 of its shareholders who are yet to receive the dividends.

Thursday, 02 January 2012

Source: Financial Express

 

The Standard & Poor's (S&P), a leading global rating agency, gave Bangladesh "BB" rating - a sovereign credit rating - indicating a stable economic outlook for the country. The US-based financial services company rated Bangladesh's economic outlook stable, seeing its strong growth prospects, adequate external liquidity, and substantial donor commitment. It, however, identified high government and external debt, limited fiscal flexibility, and significant energy and infrastructure deficiencies as the key weaknesses for Bangladesh economy. The S&P's latest rating report on Bangladesh has been made available in the Bangladesh Bank (BB) website. The BB termed the S&P's rating 'positive', and said it will help the country float its first-ever sovereign bond to raise foreign currency fund from global financial market. "Strong and stable economic growth along with ongoing substantial donor engagement, which supports continued improvement in debt ratios, underpin the ratings," the S&P said. Adequate central bank reserve coverage is another supporting factor for the ratings, it said. According to the S&P, Bangladesh has had strong real per capita income growth and favourable growth prospects. "Real per capita gross domestic product (GDP) growth averaged 4.7 per cent in the past five years with stable fiscal and monetary conditions," said the S&P. In the medium term, the garment sector, remittances, and agriculture are likely to support growth rates in line with the recent trends, it revealed. Moreover, as infrastructure deficiencies are gradually alleviated, there is upside potential to the current growth forecast of 6.0 per cent to 7.0 per cent, it mentioned. The stable outlook reflects Bangladesh's strong growth prospects and ongoing donor support, which ensures low-cost and long maturity external debt that minimises refinancing risk, the S&P said. These factors are balanced against emerging balance of payments (BoP) pressures, as remittance growth slows and imports expand, and the risks from rising inflation and a weakened banking sector, the S&P mentioned. "We could raise the ratings, if the government persists with measures to expand the revenue base and improve administrative and collection efficiency, leading to a material rise in its revenue. We could also upgrade Bangladesh, if rising investment leads to a sustainable increase in real GDP growth," it said. "Conversely, we could downgrade the sovereign, if fiscal slippages result in rising public debt, and external donor support declines materially. We could also lower the ratings, if incipient BoP pressures accentuate and lead to anerosion of external liquidity through lack of appropriate policy responses," the S&P observed further. A moderately strong foreign exchange reserve buffer also supports the rating. Usable reserves are at approximately 4.7 months of current account payments in 2010, up from two months in 2000. Gross external financing needs, as a percentage of current account receipts plus usable reserves, have declined to 76 per cent in 2011 from a peak of 101 per cent in 2001. The S&P expects that this level of reserves, combined with donor support, will sustain an adequate external liquidity position. The ratings on Bangladesh are also underpinned by substantial bilateral and multilateral donor engagement. Donors influence policy formulation and provide direct budgetary support, it said, mentioning that the donors also provided selected education, health, and other social services to the general population, easing the fiscal burden on the government. "Our transfer and convertibility assessment reflects our view of the likelihood of the sovereign restricting non-sovereign access to foreign exchange needed to satisfy the non-sovereign sector's debt service obligations," it stated. For Bangladesh, the S&P views this risk as being similar to sovereign default risk because strict official controls over capital outflows have been in force throughout the country's history, and are likely to remain in place in the medium term. Bangladesh's relatively high public and external debt is a key rating constraint, the S&P said. Net general government debt at a projected 36 per cent of GDP in 2011 is well above that of peers, and the associated interest burden of 18 per cent of general government revenues is more than double the median for similarly-rated countries and of peers, it mentioned. The external debt component, at 66 per cent of current account receipts, is similarly high, although a low debt service cost of about 3.0 per cent of exports and a weighted average maturity of 34.7 years considerably mitigate the impact of debt servicing on external liquidity. Bangladesh's limited fiscal flexibility owing to its narrow revenue base and high infrastructure and social needs is an additional rating constraint. Significant energy and infrastructure deficiencies as well as administrative and bureaucratic weaknesses also constrain the ratings, it mentioned, adding these factors prevent Bangladesh from achieving higher economic growth. The difficult operating environment is reflected in the country's low ranking in international surveys and in perennially low (net) inflows of foreign direct investment (FDI) of about 1.0 per cent of GDP. Rising proportion of local currency funding of borrowing needs is positive, but it carries high interest cost compared with the low-cost concessional external funding, the S&P added.

Wednesday, 28 December 2011

Source: The Daily Star

National Board of Revenue (NBR) Chairman Nasiruddin Ahmed has said scope for whitening black money given in the budget will continue until June. “If anybody invests in the stock market after paying 10 percent tax, no question will be raised about the nature of his money as per income tax law,” the NBR chairman told reporters in Dhaka. However, replying to another question as to whether such objections will be raised under any other law, the NBR chairman said, it is not for the NBR to look into what other laws contain. He said, no objection will be raised under tax law. Recently, some newspapers have reported that the government may remove scope for whitening black money, after the Asia Pacific Group on Money Laundering, an international body, objected to the practice.

Wednesday, 28 December 2011

Source: Financial Express

The remittance sent by Bangladeshi expatriates marked a 9.25 per cent rise in the current year compared to 1.4 per cent in 2010, said a report of RMMRU, a research organization at Dhaka University, reports UNB. President of Refugee and Migratory Movements Research Unit (RMMRU) Prof Dr Tasnim Siddiqui released the report at a press conference at National Press Club Tuesday. The report said the largest amount of remittance came from Saudi Arabia, followed by the United Arab Emirates, the USA, Kuwait, the United Kingdom and Malaysia. It found that a large number of people are moving aboard from six districts - Comilla (12 per cent of total migration), Chittagong (9 per cent), Dhaka (7 per cent), Brahmanbaria (6 per cent), Chandpur (5 per cent) and Tangail (4.8 per cent). Although there is internal migration of the climate-induced people from the country's coastal belt and Monga-prone areas, there is hardly any migration aboard from these areas, according to the report. About the expatriates who returned from Libya this year, the report said 65 per cent of the returnees do not have any arable land, while 10 per cent have no homestead. About 90 per cent of them had migrated taking loans. Speaking at the press conference, Dr Tasnim Siddiqui, also a teacher at Dhaka University, said creating jobs for those retuned from Libya is a challenge for the government. She stressed creating a data base of those who return home from abroad to utlise their knowledge and skill. Dr Tasnim urged the government to announce the 2012-2021 as 'Migration Decade', aiming to promote migration abroad and thus increasing the remittance inflow.

Wednesday, 28 December 2011

Source: The Daily Star

The central bank has introduced a new call money market, Islamic Interbank Fund Market (IIFM), for shariah-based banks and financial institutions. Bangladesh Bank (BB) laid out a set of rules, according to a statement released. The decision to introduce the IIFM has been taken to discipline the liquidity management of all shariah-based banks, financial institutions and Islamic banking branches of the traditional financial institutions and banks operating in Bangladesh. It said the transactions would be based on profit instead of interest. According to the rules, if a bank has excess funds, it will invest the amount in the IIFM for a day, allowing another cash-starved Islamic bank to borrow for the same period.

Tuesday, 27 December 2011

Source: The Daily Star

Bangladesh exports survived the global financial crisis in 2008, helped by basic garment products. In the following years, the country's ready-made garment exports weathered out fallout from the global recession and grew nearly 42 percent in fiscal 2010-11. The growth rate was highly appreciated at a time when the world was in economic pain; Bangladesh was one of the few countries that witnessed exports in the positive territory. At the same time, the country turned into the world's second largest apparel supplier, after China. Garment exports stood at $17.91 billion in fiscal 2010-11, taking up more than 78 percent of overall exports. Of total apparel exports, knitwear accounted for $9.49 billion, while woven was $8.43 billion in fiscal 2010-11. In the first five months (July-November) of the current fiscal year, Bangladesh exported knitwear goods worth $4.0 billion and woven garments worth $3.57 billion. However, exporters are predicting a double-dip recession for the debt crisis in the EU, which might hurt the growth of exports to the Euro zone, the largest garment export destination for Bangladesh. Exporters aim to achieve apparel exports above targets, beating the debt crisis, riding on exports to new destinations -- Japan, South Africa, Russia, Brazil, Chile, Mexico, New Zealand, Australia and India. Moreover, product diversification and arrival of high-end customers like Adidas, Hugo Boss, Tommy Hilfiger, s.Oliver, Olymp and Next will play a positive role in helping exports grow above the target for 2012. Having enjoyed a significant rise in exports in fiscal 2010-11, the commerce ministry set the target higher at $20.36 billion -- knitwear garments at $10.80 billion and woven products at $9.56 billion. Garment makers said export growth depends on the adequate supply of gas and power, a pool of skilled manpower for mid-level management and efficiency in port management and good infrastructure. Exporters also often complain about the frequent hikes in petroleum prices, higher transportation costs, traffic congestion, workers' unrest, soaring inflation, and internally, the list is seemingly unlimited. Along with the internal factors, some external factors that may affect garment exports are the European debt crisis, proposed duty-waiver facility for 75 Pakistani products to the EU, higher prices of raw materials like cotton and yarn, and different tariff, para-tariff and non-tariff barriers to new export markets like India and Russia. The year 2012 will be a determining period to grab the exporter orders shifting from China, the largest exporter of apparels globally, as countries like Bangladesh, Vietnam, Indonesia and Cambodia are likely to be benefited. China is losing its market to competitors for higher costs of production and a shortage of workers in the sector. Bangladeshi garment exporters are eyeing to be the number one supplier in the coming years, although the country does not have basic raw materials and machinery backup. In the beginning of the year, EU-relaxed the Rules of Origin (RoO) under the Generalised System of Preferences (GSP) from January 1 -- it became a boon for garments and a bane for the primary textiles sector. Similarly, Japan, Norway and Switzerland also relaxed the RoO for the least developed countries (LDCs) in the beginning of the current calendar year. In February-April, cotton and yarn prices went up to record levels at $2.35 a pound and yarn at $7.0 a kilogram. In the middle of this year, Bangladesh bagged a duty-free entry for garment products to India. The opened a window of opportunity for local apparel makers. In October, the US again granted a GSP facility to its market for some selected products, like sleeping bags, at the end of September. Both the primary textiles sector and RMG sectors witnessed a sluggish investment trend in 2011, mainly for the inadequate supply of gas and power. Many industrial units cannot go into operations for the lack of gas and power connections. The government announced an additional five percent cash incentive for the spinners who incurred losses importing high-priced cotton from the world market.

Tuesday, 27 December 2011

Source: Financial Express

The securities regulator has formed a committee to fix the definition of 'free-float' in a bid to implement the new benchmark DSE general index (DGEN) under free-float method. The decision comes after the Securities and Exchange Commission (SEC) Monday held a scheduled meeting with the representatives of both the bourses and Central Depository Bangladesh Limited (CDBL) to discuss the implementations of new DGEN. The SEC Member Arif Khan will lead the committee comprised with other representatives of Dhaka and Chittagong Stock Exchange and CDBL. The committee will submit a report within fifteen days to the securities regulator. The SEC's latest move in fixing the definition of free-float was taken in line with the recommendation of SEC's index committee to revise DSE's existing DGEN under free-float method with a base point of 1,000. A top SEC official told the FE that the securities regulator has formed another committee to fix the definition of free-float by removing any confusion or controversy.

Tuesday, 27 December 2011

Source: The Daily Star

 The stock market regulator yesterday formed a committee to set the definition of “free float”, as a new index to be introduced on the bourses would be based on free float or tradable shares of listed companies. Fresh index with international standards will be introduced on the stock exchanges that will replace the existing indices of the twin bourses. The committee, led by SEC Member Arif Khan and comprising representatives of Dhaka Stock Exchange, Chittagong Stock Exchanges and Central Depository of Bangladesh Limited (CDBL), will submit its report to the commission within next 15 days. Generally the float is used to describe the shares of a company that are freely traded on an exchange, as opposed to the shares which are not publicly traded. The decisions were taken at a meeting of the SEC with representatives of the DSE, CSE and CDBL, according to a press statement. SEC Chairman Professor M Khairul Hossain presided over the meeting. “The meeting discussed the introduction of an index in line with international standard and decided to form the index on the basis of free float,” said the statement, signed by SEC Executive Director Anowarul Islam. Earlier, a regulatory committee on index asked the SEC to introduce a new index with a base point of 1,000 eliminating the existing ones that contain inflated points due to faulty computation. The committee also recommended that the commission formulate the new index based on free-float shares of listed companies. “Free-float shares are taken into account to calculate indices in different markets such as MSCI, FTSE, STOXX, SENSEX, S&P and Dow Jones,” the committee said in its report. The committee, however, asked the commission to define the term “free-float” before introducing the new index. The index committee of the SEC also recommended the introduction of sectoral indices in addition to the general index and all-share price index. Presently, both Dhaka and Chittagong stock exchanges have three types of indices. The indices of the premier bourse are DSE General Index, DSE All Share Price Index and DSE-20, while the indices of the port city bourse are CSE All Share Price Index, CSE Selective Categories Index and CSE-30.

Tuesday, 27 December 2011

Source: The Daily Star

Asad Khan has recently been elected as the chairman of Bangladesh Leasing and Finance Companies Association (BLFCA) for 2011-12 and 2012-13 terms. Khan is the managing director of Prime Finance and Investment Ltd, BLFCA said in a statement yesterday. The association also elected a nine-member executive committee where Selim RF Hussain was elected as its vice chairman. Hussain is the managing director of IDLC Finance Ltd, the statement added.

Thursday, 22 December 2011

Source: The Daily Star

 

The stock market regulator has asked twin bourses to come up with a detailed plan on demutualization of stock exchanges by year-end. The Securities and Exchange Commission (SEC) directed the Dhaka and Chittagong stock exchanges to submit the detailed concept papers to the finance ministry by December 30. Demutualization transforms a stock exchange from a mutually-owned entity into a for-profit company owned by shareholders by switching its existing legal structure into a business corporation. It ensures sound corporate governance, alternative business models and operational efficiency. The SEC issued the directive in line with a requirement of the finance ministry. The finance minister at a meeting with the twin bourses in September asked the stock exchanges to come up with a detailed plan on demutualization. Bangladesh's stock exchanges are now non-profit cooperative organizations, owned by the exchange members, who are usually stockbrokers. The Dhaka Stock Exchange was incorporated in 1954 and trading on the bourse started in 1956, while the Chittagong Stock Exchange was established in 1995. The bourses' responsibilities include listing of companies, providing screen-based automated trading of listed securities and trade settlement. The SEC also sought opinions from the two bourses on amendments to the rules that govern merchant bankers, portfolio managers; stock dealers and brokers. The regulator asked them to submit their opinions to the SEC by January 3.

Thursday, 22 December 2011

Source: Financial Express

The securities regulator has revised the Merchant Banker and Portfolio Manager Rules 1996, incorporating some provisions concerning, among others, appointment, termination and suspension of chief executives of the merchant banks. The move comes after surfacing of some allegations about chief executives of some merchant banks playing 'controversial' roles during the recent stock market debacle. The Securities and Exchange Commission (SEC) issued a gazette notification on December 20 on the revised merchant banker and portfolio manager rules. The revised rules have imposed restrictions on the direct or indirect connections of managing directors (MDs) or chief executive officers (CEOs) of the merchant banks with any securities-related business. At the same time, their involvement with any stock exchange, its members or issuer companies will also not be allowed under the new rules. The tenure of the chief executives will be a three-year period and this tenure can be extended only after approval by the securities regulator. But no CEO will be allowed to continue his job, if his age reaches 65. The revised rules have empowered the board of directors of the merchant banks to terminate or suspend the chief executives, if they fail to discharge their responsibilities or they are found guilty of any misconduct or for reasons of moral turpitude or degradation. However, two-third members of the board of directors of a merchant bank will have to approve such a decision and the accused CEO must be provided a reasonable period of time to put forward his written and verbal opinions in response to the allegation(s). About the vacancy of the posts of CEOs, the revised rules said the next senior most executive of a merchant bank will carry out the responsibility of its CEO until the next one is appointed. The SEC will appoint the chief executive for a merchant bank, if its board of directors fails to appoint its CEO within three months following the departure of the erstwhile chief executive. In that case, the merchant bank concerned will have to bear the salary and other financial costs on account of other facilities that are allowed for the newly-appointed CEOs. Under the revised rules, the securities regulator will also issue directives from time to time about the qualifications required for becoming a CEO. But the appointment of chief executives in the subsidiary merchant banks of ICB and other state-owned banks will not come within the purview of such rules, the gazette notification added. The SEC executive director and spokesman Mohammad Saifur Rahman said the securities regulator has incorporated the new conditions in the revised rules, after a careful consideration of the overall situation in the country's capital market. He said the SEC has already formed a committee for making recommendations to help bring about overall changes to the merchant banker and portfolio manager rules to ensure proper transparency and accountability of the merchant banks. Earlier, experts and investors made allegations against the merchant banks, as they are most engaged in lending operations and do hardly offer any portfolio management services, upon proper exercise of their due diligence and discretionary power, to their clients which, according to them, are also responsible for exposure of a vast majority of investors in the stock market to some unwarranted risks and also market manipulations by the vested interests.

Thursday, 22 December 2011

Source: Financial Express

Bangladesh Bank is going to introduce the Islamic money market by this month to facilitate liquidity management of the Shariah-based Islamic banks, a top official at the central bank said. The decision was taken at a meeting with chief executive officers and managing directors of seven Islamic banks held at the central bank Wednesday with Bangladesh Bank (BB) Executive Director SK Sur Chowdhury in the chair. Besides, a member of Shariah boards from each bank was also present at the meeting. "We've decided to introduce the Islamic Inter-bank Fund Market for the first time in Bangladesh by the end of this month," Mr. Sur told the FE, adding that it would be a milestone in the Islamic banking's history of the country. Under the arrangement, Islami Bond Fund (IBF) will act as a custodian of the excess fund of the Islamic banks and financial institutions, another BB official said. The IBF will facilitate the fund transfer from banks having excess liquidity to the ones having deficit under Islamic Shariah. "It will not charge any amount from the participating banks and non-banking financial institutions (NBFIs) for providing the services," the central bank official said, adding that the deal would be based on Mudaraba principle of Islamic banking law. Market operators have welcomed the BB's latest move saying that it's a historic decision concerning Islamic banking in Bangladesh. "The Islamic banks will be able to manage their liquidity, particularly excess funds properly after introduction of the money market," Managing Director of the Islami Bank Bangladesh Ltd. (IBBL) Md. Abdul Mannan told the FE. Md. Mannan, also chairman of the Task Committee of the Islamic Banks Consultative Forum (IBCF), said the country's Islamic banks are grateful to the BB for taking the decision to introduce such a market. "We expect that the market will open a new window on investment of the Islamic banks' surplus liquidity," he noted. Currently, there is no tool for managing liquidity of the Islamic banks in Bangladesh. Some Islamic banks are using their surplus funds among them through an informal or unofficial money market. Under the existing rules, Islamic banks maintain 11.50 per cent statutory liquidity ratio (SLR) instead of 19 per cent for conventional banks as they cannot participate in the treasury bills' auction and cannot buy any interest-bearing government bonds that involve receipt of interest. The Shariah rules cannot permit payment or receipt of interest by any individual or institution. Currently, seven private commercial banks out of 30 are operating under the Shariah. The banks have their own Shariah Councils to dictate terms of banking under Islamic rules and regulations. The banks are Islami Bank Bangladesh Limited (IBBL), Al-Arafah Islami Bank Ltd., Export Import Bank of Bangladesh Ltd., Social Islami Bank Ltd., Shahjalal Islami Bank Ltd., First Security Islami Bank Ltd. and ICB Islamic Bank Ltd. Besides, a good number of local and foreign banks have introduced Islamic banking branches and windows, the central bank official added.

Wednesday, 21 December 2011

Source: The Daily Star

The stockmarket regulator yesterday gave a go-ahead to the Dhaka Stock Exchange to appoint a new chief executive officer (CEO). The permission came at a meeting of the Securities and Exchange Commission. Earlier, the DSE selected Dr Mosharraf Hossain for its top post. Hossain had last worked at American International University-Bangladesh as an associate professor. Apart from serving different multinational organisations, he also worked as an ADC (aide-de-camp) to the president while he was in the air force. Earlier on December 13, the SEC served notice on the premier bourse for its failure to appoint a CEO in time, as the post had been remaining vacant since September 8. The DSE board, with a prior approval from the SEC, was supposed to appoint a chief executive within three months after the post fell vacant. The deadline expired on December 8. Seeing no progress in this regard, the regulator had issued the notice and asked the bourse to provide the updates of the appointment process. Although the DSE in a letter to the commission on December 1 sought time extension for the appointment till March 8 next year, the SEC did not extend the deadline. Md Zahurul Alam, chief operating officer of the Dhaka bourse, has been carrying out the responsibility of the CEO since September 8.

Wednesday, 21 December 2011

Source: The Daily Star

A new index with a base point of 1,000 is likely to replace the Dhaka bourse's existing general index that contains inflated points due to faulty computation. The new index that may come early next year will be based on free-float shares of listed companies. It will not take "locked-in" shares into account, a committee of the Securities and Exchange Commission recommended. The SEC's commissioners yesterday sat to scrutinise the recommendations made by the committee. "We sat to set the next course of action on the introduction of a fresh index on the DSE," said a member of the commission. The index committee of the SEC also recommended the introduction of sectoral indices in addition to the general index and all-share price index. The committee, which recently submitted its report to the commission, made the recommendations after examining the existing index calculation methodology, reviewing suggestions made by the DSE's consultants, and studying the international practices on index methodology. "Free-float shares are taken into account to calculate indices in different markets such as MSCI, FTSE, STOXX, SENSEX, S&P and Dow Jones," the committee said in its report. The committee said the DSE should reconstruct its indices considering free-float shares of listed companies. Presently, the DSE indices are calculated on the basis of market capitalisation of all outstanding shares. It means the bourse considers tradable securities as well as infrequently traded (sponsors' or directors') and locked-in securities while counting the index points, it said. But the counting method does not reflect appropriate market position, the committee added. Asking the commission to start the new index from next year, the committee said the term “free-float” may be defined as total shares outstanding except shares held by sponsors and directors of a company and under lock-in provision. However, it said the commission should define the terms "free-float" and "sponsor". Adjustment (inclusion or exclusion) of securities in the free-float category will be made on a real time basis, and the stock exchanges will establish a system to collect the number of free-float shares on a real time basis, the committee said. The free-float market capitalisation will be calculated at actual. It means, actual percentage of shares will be considered. The SEC committee also found that several distortions affected the DSE indices since the introduction of the indices. New listed shares were used to be included in indices in the first trading day, while corporate bonds and closed-end mutual funds were used to be included in indices, which did not reflect the proper movement of traded equity securities. The number of securities, increased by issuance of stock dividend or right shares, was used to be adjusted considering there physical inclusion in the paid-up capital instead of record date. It deflated the index after the record date because actual price adjustment was made in the market immediately after the record date (date of entitlement). Cash dividends were used to be adjusted in indices, the committee found. About the current state of the DSE indices, the committee said the premier bourse now uses "value weighted method" to construct the indices that is generally followed globally. "The DSE has corrected by adjustment of new issues on the second day of trading in indices instead of first trading day, and corporate bonds and mutual funds are already excluded to calculate the indices,” it said. Corporate entitlements such as bonus and rights are adjusted on post record date instead of after general meeting of a company and subsequent crediting shares, and cash dividends are not considered to calculate the indices, the committee said. The error in index counting first came to light through media reports in October last year.

Wednesday, 21 December 2011

Source: Financial Express

The securities regulator Tuesday approved the appointment of Dhaka Stock Exchange (DSE) chief executive officer (CEO) Dr. Musharraf M Hussain and the rights share proposal of Saiham Textile, officials said. The approvals came at a commission meeting chaired by the Securities and Exchange Commission (SEC) Chairman Professor M Khairul Hossain. The regulatory approval to the newly appointed CEO of DSE comes after the board of directors of the prime bourse approved his appointment for the post of chief executive, which remained vacant since September this year.

 Wednesday, 21 December 2011

Source: Financial Express

 Asif Ibrahim has been re-elected President and Haider Ahmed Khan, FCA elected Senior Vice-President of Dhaka Chamber of Commerce & Industry (DCCI) for the year 2012. The new Board of Directors took over charge at the 50th Annual General Meeting (AGM) of DCCI held at its auditorium Tuesday. The newly elected members of the Board of Directors for this term are Abul Hossain, Osama Taseer, Md Iftekharuddin (Naushad), Kh. Shahidul Islam and Hossain A Sikder.Mr Asif was born in Dhaka in a respectable Muslim family in 1965. He received his formal education from the University of Delhi (India) and the University of North Texas (USA). He is currently the Vice-Chairman of Newage Group of Industries, a business house involved mainly in manufacturing and exporting ready-made garments, textiles, plastic products and information technology. Mr Asif previously served the executive committee of France Bangladesh Chamber of Commerce and Industry (CCIFB) and Bangladesh Thai Chamber of Commerce and Industry (BTCCI). He is also the former Chairman of the research cell of Bangladesh Garments Manufacturers and Exporters Association (BGMEA). He was recognized by the commerce ministry as a Commercially Important Person (CIP) in 2007 for his company's performance in Woven RMG export. Mr Haider was born in 1955 in a respectable Muslim family and completed his masters in Finance. He is the partner of Ahmed Khan & Co, Chartered Accountants and fellow member of the Institute of Chartered Accountants of Bangladesh. He is also the Chairman of MM Agro Enterprise Ltd and Director of Flower Fashions Ltd and Seasons Dresses Ltd. He was the Director of DCCI in 2006-2008 terms.

Tuesday, 20 December 2011

Source: Financial Express

Bangladesh will see a surge in capital from advanced and emerging economies in the next five years, lured by cheaper stocks and tax incentives, a senior Standard Chartered Bank official says. Harinder Singh, a managing director of the UK-based but emerging markets-focused bank, has said institutional investors, mutual funds, private equity firms, and wealth management groups from the Organization for Economic Cooperation and Development (OECD) countries would come to Bangladesh in droves to invest. OECD is a 34-member bloc of the world's most advanced and emerging economies. "This is a time of great opportunity," said the Mumbai-based banker, even if he is aware of the risks associated with euro-zone crisis and a stuttering global recovery. He has no estimates of the potential flow. His comments came as the average stock price-to-earnings ratio in the capital market hovered below 15 while the government waived a 10 per cent tax on income from mutual funds. Although Dhaka Stock Exchange, the premier bourse, is one of the worst-performers in Asia this year, its market capitalization is still as high as $33 billion. Cheaper stocks have provided rooms for bargain hunting by foreign portfolio investors whose participation in Bangladesh's equity market is negligible. Mr Singh said his bank is also seeking to mobilize funds for Bangladesh's power sector, which requires an investment of US$9.0 billion to produce 9,426 megawatts of electricity by 2015. "We're trying to raise Bangladesh's profile abroad. Investments will be flowing in power and telecommunications sectors," he said. Foreign direct investment climbed by 30 per cent in 2010 to US$913.32 million, up from $700.16 million a year ago, the United Nations Conference Trade and Development (UNCTAD) data showed. Mr. Singh, whose career with Standard Chartered spans as long as 17 years, said international capital should be harnessed in a way, making sure that it adds maximum value and trickles in useful and productive sectors. Although liquidity crisis has engulfed the local banking industry, he said Bangladesh operations of Standard Chartered remain unscathed, because "we're disciplined in balance sheets." However, the bank's profit after tax plunged by Tk 350 million to Tk 4.5 billion in 2010, down from Tk 4.8 billion the year before, according to figures available with the bank. Mr Singh, a business graduate of Delhi University, said positive demographics and domestic demand would propel Bangladesh's growth in the coming years. "We're bullish about (Bangladesh's) prospects," he said, insisting that young people who make up two-thirds of Bangladesh's 160 million population would prop up growth. The country's internal demand is driven mainly by its 3.0 million-odd middle class with considerable spending habit, say economists. Despite the debt crisis in the euro-zone and US economic woes, the Bangladesh economy expanded at 6.6 per cent in the last financial year, its highest since the early 1970s. But he said market forces would determine whether it is good or bad to issue new licenses for private lenders in what is otherwise Bangladesh's crowded banking sector. The depreciation of Bangladesh Taka doesn't worry the banking professional who said India's Rupee declined by 16 per cent this year -- the worst performing currency in Asia in 2011. "Bangladesh is a key market for us. We feel that we're a local bank and we bring in cross-border expertise," he said. "We're here for 107 years and not focused on short-term profitability."

Tuesday, 20 December 2011

Source: Financial Express

Bangladesh has started preparations to implement the Basel-III framework for bank companies from 2014 in line with the global standard, a top central bank official said Monday. "We've started the ground work to implement the Basel-III for bank companies by 2014”. The Basel-III is a new global regulatory standard on bank capital adequacy and liquidity agreed upon by the members of the Basel Committee on Banking Supervision. The third of the Basel Accords was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis. The Basel-III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. "Liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) are pros and cons of the Basel-III framework," Mr Sur said, adding that the central bank is providing training to the commercial bankers about the LCR and NSFR. The LCR is a new liquidity standard introduced by the Basel Committee to ensure that a bank maintain an adequate level of unencumbered, high-quality liquid assets that can be converted into cash to meet its liquidity needs for 30 calendar days. The NSFR is a new standard introduced by the Basel Committee aiming to limit over-reliance on short-term wholesale funding assessment of liquidity risk across all on and off-balance sheet items. As part of the preparations, the central bank has been organising a three-day-long training programme on liquidity risk management tools since Sunday. It will continue today (Tuesday), he added. "We're organising the training programme aiming to improve efficiency of the commercial bank officials about measuring, identifying and controlling of liquidity risks in line with the existing Basel-II and Basel-III frameworks," Mr Sur noted. He also said the central bank advises the bankers for taking necessary measures to submit liquidity profile reports in line with the BB's prescribed formats. Liquidity profile is a snapshot of a bank's overall liquidity position in different time buckets. The CDR is the proportion of loan-assets (investment-assets) created by the banks from the deposits received. "Excessive credit growth, that is, when the credit growth is higher than the deposit growth, causes higher interest rates," the BB said in a document, adding that this is simple, because banks are borrowing for a short term for credit expansion. "When the payment is due they again borrow. But when most of the banks have the similar situation in their books, scarcity of fund arises which causes higher interest rates," it noted.

Monday, 19 December 2011

Source: Financial Express

An official gazette notification on the revised rights share issue rules, enforced recently by the Securities and Exchange Commission (SEC) to ensure more transparency, was published Sunday, officials said. The SEC brought some major changes in its rights share issue rules. As per the revised rules, no issuer of a listed security can demand premium for rights share of the company, if it has not been in commercial operation for immediate past three years, maintaining a track record of profitability. Besides, an application for issuing rights share along with the offer document shall be furnished to the SEC for approval within 15 working days of approval by the company's shareholders in an annual general meeting (AGM) or extraordinary general meeting (EGM). At the same time, the issuer will have to post the rights share offer document in its website along with the websites of the SEC, the stock exchanges, and the issue manager within three working days from the date of approval in the AGM or in the EGM and shall remain posted until the closure of the subscription period. Meanwhile, the SEC got a clarification from the Dhaka Stock Exchange (DSE) on misleading figures of gainers and losers showed on the DSE website on December 4 (Sunday). On the day, the DSE software wrongly calculated the actual gain and loss made by 135 securities whose face-value were converted into Tk 10 each. The DSE calculated Sunday's closing prices taking into account Tk 10 as the face-value for 135 listed securities, but it kept Thursday's closing prices unchanged in accordance with the previous face-values and market lots. As a result, many shares which actually gained were shown as losers due to the programming errors. The SEC said although the DSE was given enough time to complete the share denomination process to bring back confidence among the investors, it failed to take necessary steps in time. A DSE official said their clarification mentioned that the DSE software, developed in 1988, takes the change in market price as equivalent to the difference between a day's last traded price (LTP) and the closing price of the day before. It could have been possible to avoid the errors, if a column of open adjusted price (OAP) could be inserted on the DSE website to calculate the change in market price based on OAP and yesterday's closing price (YCP). But it was not possible, as the DSE management needed to bring the change simultaneously in nearly 3,500 brokerage houses, the DSE clarification said. It said the errors could also be avoided, if the DSE adjusted the closing prices Saturday according to converted face-values. "But the law does not permit us to adjust any price on Saturday when no transactions take place at the bourses," the DSE said. However, on December 5 (Monday), the problem was solved automatically by the DSE software, as it took into account Sunday's adjusted prices.

Monday, 19 December 2011

Source: Financial Express

The country's overall import payments grew by nearly 23 per cent in the first four months of the current fiscal year (FY), mainly due to an increase in import bills for intermediate goods and fuel oil, officials have said. "The overall import payments increased significantly thanks to the higher imports of petroleum products and intermediate goods during the period under review," a senior official at the Bangladesh Bank (BB) told the FE Sunday. Letters of credit (LCs) against imports worth US$ 11.75 billion were settled during July-October of FY `12 compared to those valued at $9.56 billion in the corresponding period last fiscal, according to the central bank statistics. The BB official expects that the pressure on import payments will ease in the coming months as import orders have already started declining from the month of November. Opening of fresh LCs against imports, generally known as import orders, fell by 10.31 per cent in November over that of the previous month of the current calendar year, the BB data showed. "The declining trend in import orders has continued in December this year due mainly to lower imports of food grains," the central bank official said. Bangladesh Taka (BDT) depreciated by 7.48 per cent against the US dollar during the period under review following an increased demand of the greenback for settlement of import payment bills by the commercial banks. The exchange rate of the US dollar against BDT rose to Tk 75.72 during the period of the FY 12 from Tk 70.45 in the same period the previous fiscal, the official data showed. Import of intermediate goods like coal, scrap vessels, hard coke and clinker has increased by 94.50 per cent to $1.0 billion during the period from $514.50 million in the corresponding period in the previous fiscal. "Higher import of scrap vessels has contributed to raising the import of intermediate goods sharply," another BB official said. The import of scrap vessels rose to $381.86 million during the period from only $14.65 million in the corresponding period of the previous fiscal. The import of fuel oils increased by 82.53 per cent to $1.68 billion in the first four months of FY `12 from $924.42 million in the same period of the FY `11, the central bank said. "The actual import of other essential items including industrial raw materials and capital machinery also increased significantly during the period to meet the domestic demand," the BB official noted. He also said fresh opening of LCs for capital machinery import decreased drastically during the period as placing of import orders for different types of capital machinery, including rental power plants, has declined recently. The import orders for capital machinery declined by nearly 34 per cent to $727.15 million during the period from $1.09 billion in the corresponding period the previous fiscal. However, actual import of capital machinery -- industrial equipment used for production --- rose by 34.62 per cent to $821.27 million during the period against $610.04 million in the corresponding period of FY `11. Food imports fell during the period under review as the country has built enough stocks for the main staple rice after a bumper Boro crop yield in May this year, the BB official said, adding that such a trend may continue in the coming months. During the period, the import of machinery for miscellaneous industries witnessed an 18.68 per cent growth to $998.52 million compared to that of $841.34 million in the same period the previous fiscal.

Thursday, 8 December 2011

Source: Financial Express

 

The securities regulator has relaxed the condition for the sponsors/directors relating to purchase of shares during the period of two months, prior to the closure of annual accounting year of the listed companies. The relaxation has been made to facilitate the sponsors/directors to fulfil the requirement of 30 per cent stakes, in aggregate, in paid-up capital and a minimum of 2.0 per cent of paid-up capital holding for retaining their individual directorship, officials said. The SEC issued a notification on the day on this matter and said the facility or waiver will remain effective until the sponsors/directors acquire the rest of their stakes to fulfil their minimum portion of shares in their companies within the time-frame set by the SEC on November 22 this year. The SEC's move comes after some sponsors/directors have recently informed the SEC that they have a bar under the hitherto existing SEC rule to purchasing shares as they are not allowed to buy shares for two months, prior to the completion of companies' financial statements. In its notification issued on November 22 this year, the SEC made holding of, at least, 30 per cent stakes in the paid up capital of a listed company by its sponsors/directors mandatory to help abate aggressive sale-pressure by some sponsors/directors without having regard for the market situation. The SEC notification then also said individually each of the directors, other than independent director(s), of any listed company must hold a minimum of two per cent of the company's total paid-up capital, and, in aggregate, the directors will have to own at least 30 per cent of such capital. At the same time, in case of non-holding of the said portion of shares, the sponsors/directors will not be able to sell or transfer the existing shares and the bonus shares, which they may receive in future, until acquisition of 30 per cent of the paid-up capital of all the listed issues, irrespective of sectors. After the issuance of this notification, it was found out that such sponsors/directors were debarred from purchasing shares of their respective companies during the closing period of their annual books of accounts. The accounting year of many listed companies ends normally in December. Under the directive of the SEC that was issued on March 23, 2010, the sponsors-directors of a listed company would not be able to purchase shares of their respective companies for two months, prior to completion of its annual financial report. Only after the approval of a company's annual financial statement by its board of directors, the buying of such shares were allowed under the earlier directive. Then, a number of sponsors/directors sought regulatory instruction so that they could comply with the notification by acquiring the minimum required stakes in their companies, in the light of the SEC's directive, dated November 22 this year.

Thursday, 24 November 2011

Source: Financial Express

The securities regulator Wednesday announced a 21-point stock market rejuvenation package that primarily focuses on greater participation of banks and other financial institutions in stock market in the short-term. The much-hyped package includes a plan to formulate a 'special scheme' aimed at helping the small investors recoup their losses. It has also tried to create some space for banks to make fresh investment in stock market by redefining their 'exposure to capital market'. Chairman of the Securities and Exchange Commission (SEC) Professor M Khairul Hossain unveiled the package at a press briefing at the office of the Commission. The measures to rejuvenate the flagging stock market came a week after the meeting between the Prime Minister Sheikh Hasina and stakeholders. At the press briefing, the SEC chairman said the measures included in the package were in short, medium and long-term in nature. "The implementation of the short-term measures will start immediately, the medium- term ones in three months and the long-term ones in six months," the SEC chairman said. The ten short-term measures include:

 

1) The loans provided by banks to their capital market subsidiaries, will not be taken into account while estimating their 'exposure to stock market';

2) The long-term equity investment made by a bank in any company will not be considered as 'capital market exposure';

3) The repatriation of commission money, which has to be paid to foreign brokerage firms in case of foreign investment, will be made speedier, subject to submission of relevant documents;

4) The 10 per cent tax imposed on the profits earned by investments by foreign institutional and non-resident Bangladeshis will be withdrawn;

5) The central bank will consider the banks' exposure limit to the stock market on a 'net-off' basis, instead of 'marking to market', basis;

6) The deadline for adjusting single-borrower exposure limit of banks has been extended by another two years, up to December 31, 2013;

7) The commercial banks have agreed to make more investment in the stock market in line with the advice given by Finance Minister AMA Muhith;

8) Insurance companies (life and non-life) have agreed to inject their surplus funds in the stock market;

9) The sponsor-directors of listed companies will have to own at least 30 per cent stakes of their respective companies; and

10) The merchant banks and other subsidiaries have so far collected 99 to 100 per cent of their funds from their parent companies, which are banks, NBFIs and insurance companies. From now on, the merchant banks and other subsidiary firms will be allowed to mobilize 49 per cent of their funds from sources beyond their parent companies.

 

The mid-term measures are:

 

1) The securities regulator will take initiatives to launch the 'Investment Advisory Service' to make the market an informed one. For this, brokerage firms will have to employ professional and expert investment managers;

2) The securities regulator will make available 'Equity Research Publication' to ensure access to information by investors, academicians and policy makers;

3) A corporate governance guideline will be formulated to ensure transparency and accountability of the listed companies; and

4) The securities regulator will immediately take measures to increase the capital of merchant banks and other subsidiary firms.

The long-term measures are:

 

1) Financial Reporting Act (FRA) will be formulated in a bid to increase the quality accounting and auditing disclosure by listed companies;

2) The present 'insider trading' rules will be upgraded and stricter.

3) The regulator will make the 'Small Investor Protection' law more time- befitting;

4) The proposed demutualisation of the two stock exchanges will be completed very soon to ensure their corporate governance;

5) Necessary measures will be taken to strengthen the mutual funds and make those more attractive to investors; and

6) The securities regulator will further strengthen the monitoring activities in the stock market by establishing improved surveillance system.

The package includes a special scheme to protect small investors' interest.

 

The SEC said in its action of plan that a 'special scheme' is going to be formed to protect the interest of small investors who really were affected by taking margin loans. For the implementation of the scheme, a six-member committee will be formed with the ICB managing director as the convener. The other members of the committee are: a representative from Banks and Financial Institution Division of the MoF, an SEC representative, Managing Director or chief executive officer (CEO) of Central Depository Bangladesh Limited (CDBL) and the CEOs of two stock exchanges. The committee will submit a full report on the issue within two months to the Banks and Financial Institution Division of the MoF.

Wednesday, 23 November 2011

Source: Financial Express

The Securities regulator Tuesday gave operational approval to the much-awaited Tk 50 billion largest ever open-ended mutual fund--Bangladesh Fund (BF), one IPO and one right approval, official said. The decision came at a commission meeting, chaired by Securities and Exchange Commission (SEC) chairman Professor M. Khairul Hossain, held at the SEC office on the day. "Though the Bangladesh Fund is yet to collect its required fund to go operation, the SEC gave operational approval, considering existing market situation," the SEC spokesman Mohammad Saifur Rahman said after the meeting. According to the rule of mutual funds, any mutual fund cannot go operation until 60 per cent of its total fund size is managed. But the SEC gave approval, considering the existing market situation, he said. The Investment Corporation of Bangladesh (ICB) is the leading sponsor of the Fund. The other sponsors are: Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Bangladesh Development Bank, Sadharan Bima Corporation and Jibon Bima Corporation. The sponsors have already contributed Tk 15 billion to the fund and the rest Tk 35 billion will be collected by selling units to individuals and institutions. Meanwhile, two private banks - AB Bank and Dhaka Bank -- bought units of BF valued at Tk 4 million - Tk 2 million each. The ICB and other sponsors took an initiative on March 6 this year to launch the country's largest ever open-ended mutual fund to support the fund-stricken stock market. They also termed Bangladesh Fund as "contingency fund". Padma Islamic Ins IPO okayed: The SEC approved the initial public offering (IPO) of Padma Islamic Life insurance. As many as 12 million shares will be floated through its IPO to raise Tk 120 million from the capital market with face value at Tk 10.

Wednesday, 23 November 2011

Source: The Daily Star

 

The Securities and Exchange Commission yesterday approved a prospectus of Tk 12 crore initial public offering (IPO) and rights offering of a listed insurance company. The stockmarket regulator also extended the tenure of a mutual fund, which was scheduled to be pulled out of the secondary market this year. SEC Chairman M Khairul Hossain presided over a meeting to clear the two issues. Through the IPO, Padma Life Insurance Company will raise Tk 12 crore from the public by floating 1.2 crore ordinary shares of Tk 10 each, Saifur Rahman, the spokesman for the SEC, told reporters after the meeting. A market lot will be 500 shares, he said, adding that the company will use the IPO proceedings for loan repayment. Existing net asset value per share of the company is Tk 14.37. Union Capital Ltd is the issue manager of Padma Life IPO. As per the rights offering, Rupali Insurance Company will issue one rights share for existing one share at an offer price of Tk 20, including Tk 10 as premium, said Rahman, also an executive director of the SEC. The company will raise Tk 39.48 crore through issuing 1.89 crore rights shares, he said. The proceedings will be used to comply with capital requirement as per the insurance act. Earnings per share of the company as of December 2010 were Tk 7.39, while the net asset value per share was Tk 39.29, he said. The SEC executive director also said the tenure of BSRS Mutual Fund has been extended to December 2012.

Wednesday, 23 November 2011

Source: Financial Express

The securities regulator has made holding of at least 30 per cent stakes of a listed company by its sponsors/directors mandatory to contain their aggressive sale pressure without caring for the market situation, officials said. The sponsors/directors holding less than 30 per cent of shares of a company will have to acquire the rest portion of shares within six months of issuing the notification. Presently, the sponsors/directors of 46 listed companies, out of the 232 companies listed with the bourses, own less than 30 per cent of shares comparing to their respective paid-up capital. A notification issued by the Securities and Exchange Commission (SEC) Tuesday also said if the sponsors/directors of any listed company fail to hold at least 30 per cent of its stakes, the company will not be able to declare right shares and raise capital through repeat public offering (RPO). The SEC Tuesday approved the notification regarding the issue at a meeting, chaired by its Chairman Professor M Khairul Hossain. A gazette on the issue will be immediately published in this connection. SEC executive director and spokesperson Mohammad Saifur Rahman at a press briefing said the move has been taken in a bid to bring accountability among sponsors/directors as well as to stabilise the market. "The regulator has been observing that the sponsors/directors of some listed companies create aggressive sale pressure whenever they want. As a result, the market experiences downtrend amid panicky situation." The DSE officials said sponsors/directors of the listed companies have sold shares worth around Tk 120 billion from May 2009 to September 2011. Rahman said the sponsors/directors also enjoy greater benefits despite owning insignificant volume of shares. "The latest move will make them much more accountable towards their companies." As per the latest provision, in case of non-holding of the said portion of shares, the sponsors/directors will not be able to sell or transfer the existing shares and the bonus shares, which they may receive in future, until acquisition of 30 per cent of stakes. The SEC notification also said individually each of the directors, other than independent director(s), of any listed company must hold minimum shares amounting to two per cent of the company's total paid-up capital, and in total the directors have to own at least 30 per cent. The SEC also incorporated a provision of selecting directors from the general shareholders. According to the provision, any individual holding shares amounting to five per cent or more of the company's paid-up capital must be entitled to be a director in its next annual general meeting (AGM) in case of casual vacancy of director(s) for non-holding the required portion of shares. Before approving the notification, the securities regulator also took opinions from its lawyer Dr M Zahir. Professor Dr Mahmood Osman Imam, a teacher of finance at Dhaka University, said giving six months deadline to the sponsors/directors for fulfilling the requirement of holding 30 per cent of stakes is very short. "It will be good if they are able to fulfil the quota by the deadline. But I think the time is very short. At the same time, 30 per cent of stakes is very high also," Professor Mahmood told the FE. He also said the new provision might help some people to manipulate the market, as it would force the sponsors/directors to purchase the required volume of shares.

Monday, 22 November 2011

Source: The Daily Star

 

Dhaka Stock Exchange yesterday proposed that sponsors of all the listed companies will have to hold at least a combined 30 percent stake in those companies all the time. It means those who are holding below 30 percent in any listed company will have to increase their holding up to 15 percent in three months, and the rest in the next six months, according to proposals of the prime bourse. To meet the requirement, sponsor directors of some companies will now have to buy back shares they had sold earlier at high profits at the current prices. The DSE at a press conference yesterday also came up with some other proposals to develop and stabilise the ailing stockmarket. The proposals came from a board meeting of the DSE and will be sent to the regulator soon for approval. Now in many listed firms, sponsors and directors have less than 30 percent stakes. Even some have less than 5 percent stakes but the sponsors control and operate the companies. It was also seen in the past that when the secondary market remained bullish, the sponsors sold off their stakes and pocketed huge money. The Securities and Exchange Commission also recently stopped sales by sponsors and directors. The retail investors have also been demanding for long that sponsors and directors should have at least 30 percent stake in their own companies. DSE President Shakil Rizvi at the press conference said sponsors and directors of a company will only be able to sell their shares in 'block market' instead of public market. According to another proposal, a general investor, who will hold 5 percent or above shares of a company, would be eligible to be a director of his or her company. There will be a minimum one director to be made from among the general investors in each company, the DSE president said. The DSE board also unanimously abolished all the committees except the audit committee and demutualisation committee of the Dhaka bourse to expedite demutualisation process. The board will, however, form an executive committee within a couple of days in this regard, Rizvi said. According to another proposal, the companies that sold shares through direct listing must buy back if the prices of those securities fell below the issue price. The DSE board also called for an acceptable solution within next three months regarding investment of those who raised capital through placement getting approval from the regulator. Earlier a number of companies sold placement shares to be listed through book building method. But the government halted the method in the face of criticism of a probe committee on the stockmarket fall early this year. The DSE also proposed to relax some rules for banks that have exposure in the stockmarket. For calculating the banks' exposure, the DSE board suggested that the market price or cost price, whichever is lower, should be taken into account. Now the calculation is done on the basis of the cost price or market price -- whichever is higher.

Monday, 21 November 2011

Source: The Daily Star

 

The stock market regulator has sought information from the merchant banks on margin loan, interest and portfolio balance of investors, who trade on credit having deposit up to Tk 10 lakh. In separate letters to chief executive officers and managing directors of all merchant banks, the Securities and Exchange Commission also asked the merchant banks to submit the information within three working days. The merchant banks will provide information about equity of the investors as of November 15, margin loan as of November 15, interest accrued between January 1 and November 15, and portfolio balance as of November 15. The letters were issued on Thursday and signed by the commission's Assistant Director Ohidul Islam. The merchant banks will also have to provide the number of clients they have as of November 15 under three categories -- clients with deposit up to Tk 1 lakh, clients with deposit above Tk 1 lakh but up to Tk 5 lakh, and clients with deposit above Tk 5 lakh but up to Tk 10 lakh. The stockmarket watchdog initiated the move in an attempt to find the investors who lost money to downswings, as the government after a high-profile meeting with Prime Minister Sheikh Hasina in the chair on Wednesday night announced that it plans to compensate the investors. The prime minister also instructed the regulators to take long- and short-term steps to stabilise the stockmarket. In line with the instruction from the prime minister, policymarkers and market regulators already held several meetings to finalise some measures to stabilise the market. “As talks on blocking margin loan interests for a certain period, extending deadline for loan repayment and redesigning the definition of investment exposure limit are going on, it is better to have an accurate picture on margin loan and interest, and the investors' portfolio,” said an SEC official. “It may not be possible to compensate the investors directly, but the steps that will be taken must help them recover from the losses,” he added.

Tuesday, 01 November 2011

Source: Financial Express

The securities regulator is contemplating changes in the minimum share-holding limit for sponsor-directors of listed companies to meet, what it considered, the need to help reduce aggressive sale pressures in the market. The Securities and Exchange Commission (SEC) has drawn up the plan as part of wider efforts to deal with volatility and stop the company owners from cashing in on a market bubble by dumping their stakes in one-go. Under the plan, sponsor-directors of firms intending to list on the stock markets could be required to hold a minimum of 30 per cent stake and those of already listed firms would be told to keep certain percentage in their ownership. "In absence of any provision of holding minimum volume of shares, the sponsor-directors dispose of shares whenever they want, which affects the market adversely," SEC chairman M Khairul Hossain said. Professor Hossain said the regulator would make some changes in the holding provisions in listed firms so that a section of unscrupulous company owners can't manipulate the market in future. Currently, the country's securities laws do not have any provision, which can force the sponsor-directors to hold a minimum stake in a company. "The holding portion can be fixed at 30 per cent for the companies, which have yet to offload their shares in the stock market. However, we are examining the matter to make it time befitting," he told the FE. When asked whether the market would face paucity of shares due to the provision, the SEC chairman said the regulator could ease the lock-in period for some stocks depending on the market situation. SEC officials said a draft order to this effect has already been prepared after consultations with lawyers, experts and chartered accountants. The law ministry is examining whether the draft conflicts with the Company Act. Barrister Moksadul Islam, a Supreme Court lawyer who is specialized in company laws, welcomed the move, terming it "a good sign" for the country's stock market. But he doubted whether the securities regulator could be able to set the minimum share-holding limit at 30 per cent for the sponsor-directors. A sponsor-director of a listed firm, whose company's sponsor-directors hold only six per cent shares in the company, said the SEC move could be a setback for the general investors. "But making the sponsor-directors keep a minimum 30 per cent stake has its drawbacks. It means only a handful of people will eat up the lion's share of the company's dividends. It'll benefit only a few," he said, speaking on condition of anonymity. At present sponsor-directors of 34 companies hold less than 30 per cent shares of their companies. Barring the mutual funds and bonds, the DSE has 241 listed companies.

Monday, October 24, 2011

Source: The Daily Star

Owners of commercial banks yesterday decided to launch a Tk 5,000 crore fund in an effort to give financial support to the stockmarket now facing a severe liquidity crisis. As a sponsor, the banks will initially pump Tk 1,000 crore into the market through the fund -- Stock Market Stabilisation Fund. “Owners of 29 banks have promised to contribute at least Tk 20 crore each to the fund, and they will take permission from their own boards within next one week,” said Nazrul Islam Mazumder, president of Bangladesh Association Banks (BAB). It will be a closed-end fund in nature having 10 years in maturity period. “The total fund size, however, may be increased,” he said. The pre-IPO (initial public offering) placement will be for Tk 2,750 crore, while the rest Tk 1,250 crore will be raised from public through IPO. The BAB, a platform of the commercial banks, yesterday sat at a meeting to find out the details of the fund including its formation and structure. Their announcement came after a platform of top executives of the banks -- Association of Bankers, Bangladesh (ABB) -- last week pledged to start fresh investment from this week. Although the banks are allowed to invest up to 10 percent of their liabilities, most banks' current exposure to the stockmarket is 3 percent on an average. “We will request the central bank not to include the banks' contribution to the fund in the stockmarket investment exposure,” said the BAB chief after the meeting. Mazumder also said if any institution wants to contribute more to the fund, it will be allowed. Apart from banks, he said, insurance companies, non-bank financial institutions and listed firms can also sponsor the fund. “We have already talked with some listed companies and they agreed to be sponsors,” he said, adding that they can be included in the fund with a minimum Tk 10 crore each. The fund will be managed either by a newly formed asset management company or by an existing one. “The entrepreneurs will have no connection in managing the fund. The asset management company will manage it by its own mechanism,” said Mazumder, also chairman of Exim Bank. Asked whether the fund is related to a 'market stabilisation fund' initiated by the private sector last month, he said, the existing one is an outcome of that initiative. The private sector had earlier stepped in to rescue the ailing stockmarket with the plan of the market stabilisation fund that also aimed to give a new lease of life to retail investors who incurred losses. AK Azad, president of the Federation of Bangladesh Chambers of Commerce and Industry, on September 29 announced a concept paper on the market stabilisation fund after a meeting with private sector stakeholders, the stock exchanges and a group of retail investors. “The purpose of the fund is to mitigate the financial losses of retail investors, especially those who trade on credit,” Azad had said.  However, Mazumder said the new fund will positively impact the market. “We will go to the Securities and Exchange Commission for permission after the banks receive a go-ahead from their boards to sponsor the fund,” he added.

Sunday, 23 October 2011

Source: Financial Express

Private banks are planning to launch a Tk 50 billion market stabilization fund (MSF) aimed at propping up the country's flagging stock market, an association representing the lenders announced Saturday. Members of the Bangladesh Association of Banks (BAB), a platform of bank owners, will finalize the modus operandi of the proposed fund at an emergency meeting today (Sunday), its chairman Nazrul Islam Mazumdar told the FE Friday. "BAB members will sit and set the terms for launching of an asset management company (AMC), which will manage the fund. Our aim is to involve as many banks as possible and may also open the door for insurers for investing in the fund," he said. Mazumdar rejected as "speculations" that the fund would have a ceremonial launching Sunday, saying that some crucial decisions including the starting date of the AMC, its approval procedure and appointment of its officials have yet been made. He said the fund would help revitalize the moribund stock market, which has declined around 35 per cent this year -- its worst performance since 1997 when the Dhaka Stock Exchange (DSE) lost 67 per cent. "The market stabilisation fund will inject new liquidity in the market by trading shares. I hope it will help steer the market to a new growth path," he said. It is not clear whether all members of BAB are behind the proposal, although Mazumdar said chairmen of at least 29 banks will attend Sunday's emergency meeting and are expected to endorse the creation of the fund. Experts have already sounded pessimistic about the latest private sector-led effort to boost the market, saying many banks have already suffered losses in stock trading and they aren't not convinced as to whether new liquidity injection alone would be able to shore up the market. A similar attempt to launch Tk 5.0 billion stabilisation fund by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and some other stakeholders went nowhere. It's not clear whether the country's apex chamber is still keen to set up the fund. The Tk 50 billion Bangladesh Fund set up by the Investment Corporation of Bangladesh was launched on October 10 as part of a government-led effort to stabilize the market. But the trading of the fund is yet to make any tangible impact on the market.

Thursday, 20 October 2011

Source: Financial Express

The central bank may relax the conditions for rescheduling margin loans on case-to-case basis aiming to help stabilise the current volatile situation in the country's stock market, a top official said. The commercial banks have so far invested nearly Tk 90 billion in the form of loans to, and paid-up capital of, their subsidiary securities' companies -- brokerage houses and merchant banks -- for investment in the country's share markets. The banks have disbursed Tk 56 billion as loans to their 33 brokerage houses and merchant banks until now, while Tk 32 billion has been invested in the form of paid-up capital to form their securities' companies as the subsidiaries, according to the central bank statistics. "Furthermore, the scheduled banks have invested additional funds in their own portfolios, in line with the existing rules and regulations," another BB official said, adding that the brokerage houses and merchant banks are now allowed to provide margin loans to their clients for purchasing shares. Total investment in shares by all 47 commercial banks were more than Tk 106 billion as on June 30 this year, the BB data showed. After the stock market crash, the market value of such investments by banks has significantly fallen in the recent months. The benchmark index of Dhaka Stock Exchange (DSE), the country's prime bourse, generally known as DGEN, came down to 5258.46 point Wednesday from its highest 8918.51 point on December 05 last, the DSE data showed. Meanwhile, Executive Director of Bangladesh Bank (BB) Jahangir Alam told the FE on Wednesday that the central bank would consider the matter about rescheduling of outstanding margin loans, positively if any bank applies, seeking relaxation of the conditions about down-payment for the purpose. He also recalled that the central bank had earlier relaxed rules allowing loan rescheduling without down-payment for export-oriented sectors affected by the global financial meltdown in 2009 to facilitate their businesses. "We'll provide all-out support in line with the existing rules and regulations to help bring stability to the stock market," the BB Executive Director said without elaborating. To reschedule normally the term loans for the first-time, borrowers have to pay minimum 15 per cent of unpaid amount of instalment dues or 10 per cent of total dues, whichever is lower, according to the existing provisions. It is at the level of minimum 30 per cent for unpaid amount of instalment dues or 20 per cent of total dues, whichever is lower, for second-time rescheduling. For the third-time rescheduling, it is 50 per cent and 30 per cent respectively. Besides, the commercial banks can waive the interest accruals on margin loans through the bank-client relationship, another BB official said, adding that the central bank has no restriction on waiving interests on margin loans by any bank.

Wednesday, 19 October 2011

Source: Financial Express

 The securities regulator has decided to reduce the settlement cycle of shares' transaction, except 'Z' category shares, to T+2 from T+3 following a proposal made by both the bourses, officials said. The decision came Tuesday at a commission meeting chaired by the Securities and Exchange Commission (SEC) chairman Professor M Khairul Hossain. The new settlement period will be effective after a joint meeting between the two bourses. Meanwhile, the SEC has approved the initial public offering (IPO) of GBB Power Limited, which will offload shares worth Tk 820 million under fixed price method. The offer price of GBB Power Limited has been fixed at Tk 40, including a premium of Tk 30 for ten taka shares each. Recently, Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) and retail investors made a proposal of reducing settlement cycle in an effort to increase liquidity flow in the stock market. The SEC Executive Director Farhad Ahmed said after the implementation of reduced trading cycle, purchased shares will be matured within two days after the date of purchasing shares and investors will be able to sell out these on the third day. Presently, investors are allowed to sell shares out of 'A', 'B' and 'N' category shares on the fourth day in accordance with T+3 trading cycle. On the other hand, 'Z' shares category can be sold out on the tenth day of making purchase as per T+9 trading cycle. When asked, whether the market would face any sell pressure due to reduced settlement cycle as presently sellers' side is stronger, Mr. Ahmed denied and said moreover the efficiency of settlement cycle will be increased. Echoing Mr. Ahmed, former SEC chairman AB Mirza Azizul Islam and stock market expert Professor Salauddin Ahmed Khan said the reduced settlement cycle would help the market to be more developed and efficient. But some other market experts expressed concern on the condition of anonymity that the market may face more sell pressure riding on SEC's latest move as most investors presently prefer an exit way.

Tuesday, 18 October 2011

Source: Financial Express

The National Board of Revenue (NBR) issued Monday three separate Statutory Regulatory Orders (SROs), restoring tax benefits for investors in stock market. From now on, NBR will deduct 0.05 per cent tax at source from stock exchange members (brokers) on transaction value of shares, debentures, mutual funds, bonds and securities, as was the practice before. Tax rate for brokerage houses was increased to 0.10 per cent in the budget for 2011-12 through Finance Bill. The revenue board also re-introduced tax rebate facilities on investment in shares, stocks, debentures, securities or mutual funds. Income of the issuers from mutual funds has also been exempted from tax through the SRO. Re-introduction of tax rebate on investment and tax benefit on mutual fund will be made effective retrospectively from July, 2011. Tax officials said the deduction of tax at source on brokerage house commission will come into effect from Monday. The taxmen can not adjust the tax that had already been deducted from the commission of brokerage houses, they said. Officials said the NBR got approval of the PM Sunday evening on its proposals for offering tax benefit for the investors in the share market. The SROs, signed by Syed Md Aminul Karim, additional secretary and tax policy member, is likely to impact the market positively, according to sources. The President of Dhaka Stock Exchange (DSE) could not be reached over phone for getting his comments. Meanwhile, NBR sources informed this correspondent that no amount of undisclosed money was invested in the stock market, availing the facility given under the tax measures for fiscal 2011-12 for disclosure of such money by paying a tax of only 10 per cent of the disclosed amount. However, the deadline for such disclosure for such undisclosed or black money will expire on June 30, 2012.

Thursday, 13 October 2011

Source: Financial Express

The central bank has assured all other regulatory bodies for the country's money and capital markets of all-out cooperation to bring back stability in the stock market. The assurance came at a joint review meeting of the watchdogs -- the Bangladesh Bank (BB), the Securities and Exchange Commission (SEC), the Office of the Registrar of Joint Stock Companies and Firms and the Insurance Development and Regulatory Authority (IDRA) -- held at the central bank Wednesday. The meeting also agreed to take concerted actions to promote stability of both financial and capital markets, by strengthening their cooperation. Presided over by BB Governor Dr. Atiur Rahman, the meeting was attended, among others, by SEC Chairman M Khairul Hossain and high officials of the concerned watchdogs. "We'll provide all-out support in line with the existing rules and regulations to bring back stability to the stock market," an executive director of the BB told the FE after the meeting. There is a scope to invest in the capital market by the commercial banks because of average capital market exposure of all banks stood at around 3.0 per cent of their total liabilities this month, he added. Currently, the banks are allowed to invest maximum 10 per cent of such liabilities in the capital market. The market capitalization of all listed issues with the country's bourses witnessed a heavy decline in recent month, leading to a sharp drop in the index. For improving the overall liquidity situation in the market, the central bank proposed to the regulatory bodies concerned to take necessary measures to encourage the insurance companies, particularly life insurance ones and mutual fund companies, to purchase the government bonds from the secondary market. "The secondary securities' market will become vibrant if the insurance companies and mutual fund companies move forward to invest their funds in government bonds," another BB executive director said. The meeting also agreed that Office of the Registrar of Joint Stock Companies and Firms will have to take no objection certificate (NOC) from the central bank, before issuing any fresh license for operating business relating to finance and investment. The meeting also endorsed a proposal of inclusion of two watchdogs --Micro-credit Regulator Authority (MRA) and Department of Cooperatives (DoC) - in the overall regulatory regime in the country's money and capital markets for the purpose of making coordinated efforts to ensure stability of both markets. "The representatives of two regulatory bodies will be invited to attend the next coordination meeting, scheduled to be held in the month of December," the BB executive director said.

Thursday, 13 October 2011

Source: The Daily Star

The stock market regulator has formed a three-member committee to introduce a flawless index computation method on the bourses. The Securities and Exchange Commission (SEC) came up with the body after an index development committee earlier submitted a report on flawless index calculation method to the commission. The SEC asked the new committee, led by the regulator's Executive Director ATM Tariquzzaman, to submit a report to the commission in the next 15 working days. The commission yesterday issued an office order to this effect, said an SEC official. The two other members of the committee are Executive Director Md Anowarul Islam and Director Mahbubul Alam. The index development committee in its report said the General Index of the Dhaka Stock Exchange (DGEN) was 1,900 points higher than the amount that should have been up to June this year. If other technical faults of the counting system are taken into consideration, the points would be higher, according to the report. The report also made two recommendations on flawless index computation -- the first one is about eliminating the wrongly added points from the index, and the second is about launching a new index. The first recommendation will be difficult to implement, while the second one will be easier and more market friendly to put into place, the report said. The flawed computation in indices first came to light through media reports in January last year, following the trading debut of Grameenphone on the stock market in November 2009. Presently, each bourse has three types of indices. The DSE introduced the general index on November 27, 2001 with a base of 817.62 points. The index, which excludes 'Z' category companies, is calculated on the basis of individual stock price movements under the 'A', 'B', 'G' and 'N' categories. Previously, there was only one index that included all the securities of the stock exchange. Starting with a base of 350 points, the index rose as high as 3,648.75 points on November 5, 1996, when the market witnessed a 'bubble and bust'.

Thursday, 13 October 2011

Source: Financial Express

 

The NBR will restore tax rebate facilities on investment in stocks and reduce tax on brokerage commission by 50 per cent in an effort to support the moribund stock market following deep concern expressed by state high-ups, officials said. Securities and Exchange Commission (SEC) Chairman Prof M Khairul Hossain Wednesday said this at a press briefing where four other SEC members - Prof Helal Uddin Nizami, Md Amzad Hossain, Arif Khan and A Salam Sikder - were present. Meanwhile, Chairman of the National Board of Revenue (NBR) Nasiruddin Ahmed told that they would speak about their decision relating to the proposals made by the SEC. The policymakers of the securities regulator arranged the press briefing a day after the SEC chairman held a meeting with Prime Minister Sheikh Hasina. They have also held another meeting with the officials of the NBR Wednesday where the revenue board assured the stock regulator about their market supportive measures. "The government wants to see a stable stock market. I have talked to all high-ups, including the finance minister and the apex authority, which are very much serious in restoring the market's stability," Prof Hossain said. He said ups and downs in the stock markets are a common phenomenon across the globe. "But the state high-ups are in deep concern following the recent declining trend of the market, which hit hundreds of thousands of investors." The SEC chairman said the high-ups and all other state officials want to see a stable, transparent and dynamic share market. "For the sake of a stable market we went to the NBR office and they told us that a declaration about the restoration of tax rebate facilities would come within a day or two," the chairman said. He said at the same time the NBR has assured us of taking into account the withdrawal of 10 per cent tax recently imposed on the mutual funds. "The existing 0.10 per cent tax on brokerage commission will also be reduced to 0.05 per cent to lessen the cost of doing business by brokerage firms," Prof Hossain said. He said the NBR wanted to know from them whether the investors would be benefited if the tax on brokerage commission is reduced. The SEC chief said the regulator will go for stern action against the brokerage firms which will charge undue fees on investors even after the government revises the imposed tax on brokerage commission. "The regulator will send letters soon on the issue to both the bourses and Central Depository Bangladesh Limited (CDBL)," the chairman added. When the reporters drew the regulator's attention towards the forced-sell by some brokerage firms and merchant banks the SEC said that they will take measures against the alleged firms following the complaints made by the investors. The SEC chairman and member Arif Khan personally told the FE that the government has taken into account the unstable situation of the market very seriously. "The government will have to sacrifice a lot of revenue earnings to revise the tax measures. Its means that the government is very much serious about stabilising the market," Arif Khan told the FE. Meanwhile representatives of the asset management companies sat with NBR officials Wednesday afternoon to talk about the effects of newly imposed tax on mutual funds. He said it's not true that the stakeholders would only be benefited if the government revises the tax measures. "The fund managers will not be able to offer sufficient dividends due to newly imposed tax on mutual funds. So, ultimately the investors will be benefited because of the reduced taxes imposed on brokerage commission and mutual funds," Mr Sayeed added.

Monday, 03 October 2011

Source: The Daily Star

The stockmarket regulator plans to amend the rights issue rules to ensure more transparency in the mechanism of raising funds by listed firms. Profitability record in preceding years, submission of credit rating and original auditor's report in case of premium value, and "due diligence" certificate by directors are the key features in a proposed amendment to the Rights Issue Rules 2006. The amendments will be published in several national dailies and also be posted on the website of the Securities and Exchange Commission for public and stockmarket analysts' opinion, said an SEC official. “After scrutinising the public and experts' opinion, the amendment will be finalised in a commission's meeting and a gazette to this effect will be published later,” the official added. A rights issue is an issue of additional shares by a listed company to raise capital from the existing shareholders. With the issued rights, the existing shareholders have the privilege to buy a specified number of new shares from the firm at a particular price within a specified time. A rights issue is in contrast to an initial public offering, where shares are issued to the general public through market exchanges. In line with the proposed amendment, a listed company that will intend to offer rights issue must have profitability record in immediate preceding year. It will be a new insertion into the rules. Removing the words “net positive cash flows from its operating activities” from an existing clause, the SEC proposed: “No issuer of a listed security shall price its rights share above par value, if it has not been in commercial operation for immediate past three years having a track record of profitability.” The SEC also proposed deleting a rule that asks for submitting cash flows statement, profit and loss account, balance sheet and notes to the accounts of the issuer made up to a date not earlier than 180 days from the rights share offer document date, together with certificate from the auditors. If a company offers rights issue at a premium value, it will have to have credit rating from a rating agency -- a new insertion into the rights issue rule. Rules may be inserted to confirm submission of original auditor's report to the commission, due diligence certificate by the directors, and submission of Memorandum and Articles of Association, Certificate of Incorporation, Certificate of Commencement of Business, Return of Allotment of Shares and Particulars of Directors. An application for issuing rights share along with the offer document will have to be furnished to the commission for approval within fifteen working days of approval of such issue by the shareholders of the company in a general meeting, the amendment proposal said. The existing rules said, such application will have to be submitted within fifteen days of the general meeting. As per the amendment, an issuer company will need to justify the offer price of its rights share. Presently, an issuer firm has to justify the offer price only if it seeks premium value.

Monday, 03 October 2011

Source: The Daily Star

The Securities and Exchange Commission yesterday announced a guideline on placement of shares with private investors. The SEC restricted the mass-scale distribution of shares through private placement with a one year lock-in period in the sales of stocks, mandatory tax identification numbers of subscribers and submission of the subscribers' list to the regulator. The proposed capital may be raised from no more than 100 investors, including institutions, according to the guideline. Private placement is a way of raising funds from chosen or selected private investors without an initial public offering. In Bangladesh's stock market, only an issue manager can sell shares under private placement on behalf of an issuer company. According to the guideline, shares allotted through private placement will be subject to lock-in for one year, before which, it cannot be transferred to another person or entity. Before raising capital through private placement, a company must obtain approval from the SEC. “Applications should be submitted to the SEC through a merchant bank along with an information memorandum,” it said. “A complete list of subscribers should be submitted to the SEC within 15 working days of closing of the subscription,” the guideline said. Sponsor or promoter group should maintain a minimum post-issue shareholding of 30 percent of the total paid up capital of the company at least for three years from the date of according consent, it said.

Wednesday, 28 September 2011

Source: New Age

 

Bangladesh Bank on Tuesday invited applications from interested sponsors for establishing new private commercial banks in the country. The central bank, which took the decision to allow setting up of more banks apparently under political pressure, invited the sponsors to submit their applications by November 30. Although the BB did not mention in the notice inviting applications how many banks would be allowed, central bank officials said licences for around 3-5 banks might be issued. The notice said interested sponsors would have to prepare and submit the applications according to the instructions provided in the Guidelines to Establish Banking Company in Bangladesh, which was unveiled on Tuesday, along with a non-refundable bank draft of Tk 10 lakh. As per the terms and conditions, the bank’s paid up capital should not be less than Tk 400 crore and the share capital will be formed with ordinary shares only. As per the guideline to establish banking company the ratio of urban and rural bank branch of the new bank has to be 1:1 and the bank has to ensure finance at least 5 per cent of its total lending into agricultural sector or as per instruction issued by BB from time to time. The notice said that the initial minimum paid up capital of Tk 400 crore will be provided by sponsors of the proposed bank, the minimum shareholding stake of each sponsor will be Tk 1 crore and the maximum will be 10 per cent of the proposed bank’s share capital. This ceiling of 10 per cent applies to an individual, company or family member, either personally, jointly or both. ‘If an individual or any member of his or her family is or had been a loan defaulter with a bank or financial institution at any time during the past five years shall not be eligible to apply as a sponsor of the proposed bank,’ said the guideline to establish banking company. ‘Competence, integrity and qualifications of the sponsors of the proposed bank becoming the first directors shall be evaluated. The evaluation process shall include background checks on whether previous activities, including regulatory or judicial judgments, raise doubts concerning their competence, sound judgment, or integrity,’ said the BB notice. According to the guideline bank shall issue public shares within three years from the date of commencement of the banking business. Public issues shall be at least equal to sponsors’ share amount. The sponsors’ shares shall not be transferred within a period of three years from the commencement of the business, without permission from Bangladesh Bank. The member of the board of directors shall be restricted to 13 while the maximum number of directors from a family shall be restricted to two in case of the total shareholding of that family exceeds 5 per cent and one director if the total shareholding is up to 5 per cent. The chief executive officer of the proposed bank shall have at least 15 years of experience in the banking profession. The BB board recently decided to allow setting up more banks after the finance ministry had asked the central bank to start process to issue licences for new banks amid hectic lobbying by leaders of ruling party Awami League to get licences. The finance minister, AMA Muhith, told reporters in July that it was a political decision of the government to allow more banks. Leading economists, senior bankers and International Monetary Fund opposed the government move saying that the existing 47 banks were enough considering the size of the country’s economy and the central bank’s monitoring capacity. But the government bowing down to the political pressure ignored the opposition.

Wednesday, 28 September 2011

Source: New Age

 

The Securities and Exchange Commission on Tuesday finalised the book-building method for initial public offering withdrawing the proposed cap on price earning ratio or net asset value of any company, bowing down to pressure of a section of stakeholders. ‘After analysing the suggestions from the stakeholders and opinion of public the commission decided to withdraw the cap on P/E and NAV for the book building method,’ said SEC executive director Saifur Rahman at a press briefing after a commission meeting.Earlier the commission drafted an amendment to the controversial book-building method setting the upper limit of P/E ratio at 15 for any company to set its primary share. DSE, however, recommended for withdrawing the cap while the Chittaging Stock Exchange recommended for lowering of the P/E at 10. In the proposed amendments, the SEC said that the indicative price of any scrip would be such that it did not exceed 15 times of the weighted average earnings per share of the preceding three years or three times of the NAV, whichever was lower. Under the book building system, introduced in 2009, a company sets its share price under an IPO for general investors based on the biddings made by institutional investors. Following the share market debacle in January, the SEC, as per a government directive, suspended the book building system in the wake of severe criticism that it allowed floatation of over-priced shares as there was no cap on P/E ratio. The SEC in the Tuesday meeting also decided to include asset management companies in as Eligible Institutional Investor category. As per the amended book-building method the indicative prices should be supported by at least 20 EIIs including at least three quotations from each of the categories that included merchant banks, commercial banks, asset management companies, stock brokers, insurance companies and non-bank financial institutions. The approved book-building method also allocated a quota of 40 per cent for the EIIs imposing a four-month lock-in on share sales. It also said that the participating EII’s should have to buy at least 10 per cent shares. According to the approved method, any company that wants to offload shares through book-building should publish advertisement in at least five well circulated newspapers 10 days prior to the road-show with EIIs. It also said the company will have to inform the indicative price to the SEC within three working days after the road show.  On Tuesday the SEC also approved the final draft of guideline for issuing rights shares and placement shares.  ‘Right shares guideline will be made public for taking opinion soon and the commission will issue a notification regarding placement shares,’ Saifur told reporters.

Wednesday, 28 September 2011

Source: Financial Express

 

The International Monetary Fund (IMF) has suggested regular oil price hikes to cut energy subsidy, an increase in bond and Treasury bill rates and changes in the country's fiscal, monetary and exchange rate policies in an effort to stave off "intensifying" macro-economic and financial risks. An IMF team made the suggestions in a report to the government of Bangladesh this week after reviewing the country's overall economic condition during a 12-day visit early this month. The Washington-based global monetary watchdog asked the government to adopt a package of near-term policy actions to preserve the country's economic stability, cautioning that lack of reforms could adversely affect growth potentials. "Bangladesh's economy continues to expand at a strong pace. However, macroeconomic and financial risks are intensifying," said the report based on a visit of the IMF Aricle-4 mission, which visited the country from September 05 to 15. The Fund also called for tax reforms, strengthening public financial management, additional monetary tightening, increasing interest rate flexibility, allowing greater exchange rate flexibility, reforms in financial sector, boosting equity market oversight and improving bank governance and performance. The report projected that Bangladesh's foreign currency reserves might decline by US$1.0 billion by the end of the current fiscal year due mainly to higher spending on oil import. On the fiscal front, the IMF has recommended regular fuel and electricity price-hike to trim budget deficit, which is forecast to be at 5.0 per cent of the country's Gross Domestic Product (GDP). According to the Fund, the country's total subsidy bill in the current fiscal year would shoot to 3.7 per cent of the GDP, up sharply from 2.2 per cent of GDP in FY2011, if fuel and electricity prices are not adjusted. The report said the balance of payments (BoP) pressures have continued to build up, owing to increased demand for oil and capital imports. As a result, gross official reserves are projected to decline by around $1.0 billion to $9.10 billion at the end of fiscal year (FY) 2011-2012. Bangladesh Petroleum Corporation (BPC) officials said fuel import bill soared due to high petroleum prices in the international market and for commissioning of a raft of diesel- and furnace oil-fired quick rental power plants over the last two years. According to the BPC, in the current fiscal year the country will have to import a total of 6.9 million tonnes of petroleum products, of which 2.2 million tonnes will be required for the quick rental power plants. In the last fiscal, the country imported 4.9 million tonnes of liquid fuel, and the power plants consumed only 1.0 million tonnes, BPC officials said. The IMF suggested that the BB should bring merchant bank subsidiaries under its supervisory framework, noting that the securities regulator -- the Securities and Exchange Commission (SEC) -- is ill-equipped to monitor these lenders' operations. The report suggested that the government defer lifting the cap on new banking licences until supervisory capacity of the BB is strengthened, liquidity pressures ease and new governance standards are put in place. 'The government itself should refrain from interfering in the operations of SCBs (state-controlled commercial banks), as corporatised institutions, at risk of undermining their profitability, limiting proper provisioning, and exacerbating recapitalization needs," the report of IMF said.

Tuesday, 27 September 2011

Source: The Daily Star

The current account may fall into deficit at $884 million for the first time in seven years due to a wider trade gap and slow remittance growth. Earlier such deficit was recorded at $557 million in fiscal 2004-05, according to Bangladesh Bank data. The government presented the information in a report on the country's overall economic situation at a meeting with Standard and Poor's on the sidelines of the annual IMF meeting in Washington on September 25. Government high officials led by Finance Minister AMA Muhith attended the meeting. Except for balance of payments (BoP), the state of the economy is good and the credit rating agency is satisfied with it, Bangladesh Bank Governor Atiur Rahman told The Daily Star by phone from Washington. The BB governor said they are hopeful that the rating of Bangladesh will improve further next time. Rahman also said if an IMF loan, which the government sought earlier for BoP support, is available, the BoP situation will improve. Already the finance minister in Washington sought quick release of BoP support. The government report said the current account balance is projected to swing into deficit in fiscal 2011-12, with remittance inflows falling short of the increasing deficits in trade, services and income accounts. The government projected that remittance growth may be 5 percent in the current fiscal year, down from 6.03 percent last fiscal year. An IMF mission that visited Bangladesh recently also projected that the country's current account deficit will be $861 million in the current fiscal year. According to IMF estimates, trade deficit will increase by around 31 percent and may reach $9.58 billion this fiscal year. The current account balance was also under a tremendous pressure last year which resulted in the overall deficit in the last 10 years. However, the IMF said one of the major causes of the pressure on the current account balance is the substantial rise in fuel prices on the international market. According to IMF projection, oil import bill may reach $6.24 billion in the current fiscal year, up from $4.10 billion last year. At a meeting, the government officials told the rating agency that Bangladesh has been facing a pressure due to the volatile situation in the world oil market. The government in the report portrayed a bright picture of the overall economy. It said the growth target of 7 percent is quite achievable provided that internal and external environment remains benign and stable, with major progress in power and gas supply. On inflation the report said it will be limited within 7.5 percent if the global commodity price trends remain moderate and demand pressures from excessive liquidity expansion remain limited with a stable benign domestic environment with no major supply side disruption.

Sunday, 25 September 2011

Source: The Daily Star

Unique Hotel and Resorts Ltd, the owner of The Westin Dhaka, has submitted its IPO prospectus to the stockmarket regulator revising its listing plan from book building to a fixed price method. Under the revised plan, the five-star hotel will float 2.60 crore ordinary shares of Tk 10 each at an offer price of Tk 115, using the fixed price method. Previously, under the book building method, the indicative price was fixed at Tk 185 per share. The number of shares was also reduced from previously planned three crore primary shares under the book building method. The Securities and Exchange Commission, being instructed by the government, suspended the book building method in January this year following a price debacle in share prices. Later, a high-profile government probe committee on the share market scam recommended modifying the book building rules, instead of scrapping it, as the system is well practised in other countries. However, at that time analysts including the probe committee members alleged that the book building method was misused by many issuer companies in connivance with the regulator, auditors and issue managers. Since the suspension, Unique Hotel has been waiting for the resumption of the book building system. “Pre-IPO private placement holders have also been waiting since then,” said Hossain. “Seeing the delay in resumption of the book building method, we have decided to go public using the fixed price method, and already submitted the IPO prospectus to the regulator for consent,” he said. Earnings per share of Unique Hotel, whose existing paid-up capital is Tk 230 crore, is Tk 5.85, while net asset value per share is Tk 77.62. Presently, the two state-owned entities -- Bangladesh Services and Bangladesh Hotels -- are listed on the Dhaka Stock Exchange. Bangladesh Services owns Dhaka Sheraton and Bangladesh Hotels owns the Purbani International.

Thursday, September 22, 2011

Source: The Daily Star

 

Sponsors and directors of listed firms will not be able to sell shares of their own companies from today, according to a Securities and Exchange Commission order issued yesterday in the face of slumping stock prices. Apart from sponsors and directors, any shareholder owning 5 percent or more stocks in any listed company cannot sell his or her holdings either, until further notice, the SEC said. “The commission passed the order considering the investors' interest and capital market development,” said Saifur Rahman, the spokesman and an executive director of the SEC. “The order shall have immediate effect and would continue until further instruction.” He said the matter of selling shares by sponsor directors were discussed in meetings with market stakeholders last week. “The stakeholders pointed out that sponsors or directors were selling their own companies' shares even amid a downward trend in the market,” he said. It also appeared to the commission that sponsors and directors of many companies are selling shares in their own firms, he added. The regulator's latest move came after the stock market yesterday suffered a steep fall in prices, in continuation of a month-long bearish trend. The key index of the Dhaka Stock Exchange yesterday plunged 2.75 percent to 5,649 points. The stock market regulator and the central bank took several positive measures this month to rejuvenate the capital market and to boost the investors' confidence, but all the steps failed to put expected impact on the market. Rather, the falling trend is deepening by the day. In another development, Salman F Rahman, president of Bangladesh Association of Publicly Listed Companies (BAPLC), said sponsors of big cap companies want to support the market by purchasing their own firms' shares from the market. “The market has come to such a level that we want to support our own companies' shares,” he said, adding that he has already talked with sponsors of seven to eight big cap companies and they all have agreed to buy their own firms' shares. “There are some minor regulatory problems in doing so. But, I have discussed the issues with the SEC and hope the problems will be solved soon,” he said.

Wednesday, September 21, 2011

Source: The Daily Star

 

The stockmarket regulator plans to extend the tenure of unit funds of the state-run Investment Corporation of Bangladesh in a move to boost the markets. “Considering the current market situation, the commission is thinking of extending the tenure of the unit funds which are scheduled to be redeemed by December,” said an official of the Securities and Exchange Commission. Earlier, the ICB urged the commission on several occasions not to liquidate or extend the tenure of the funds, but the regulator did not agree. “If the funds are liquidated as scheduled, it may create extra sales pressure in the secondary market, when the market suffers a downward trend,” the official said. The SEC is so thinking after the ICB once again requested the regulator to extend the tenure. The funds, which have no maturity period, are scheduled to be pulled out from the secondary market by December this year as per a regulatory direction. Earlier on Monday, ICB Managing Director Md Fayekuzzaman at a press briefing said they also requested the finance ministry to take steps in this regard. “The ministry assured us that the tenure of the funds will be extended,” he said. The ICB went to the finance ministry as the funds were launched between 1980 and 1996 under the now defunct 'Controller of Capital Issues' of the ministry. The stockmarket has been facing high volatility since the price debacle in January along with continuous erosion in investor confidence. Mutual funds play an important role in a market, as they can assist the market through buying support. The ICB's unit funds, which are perpetual in nature, declare healthy dividends for the unit holders every year. A perpetual or open-ended mutual fund is a professionally managed collective investment scheme that has unlimited lifetime and size. The fund manager pools money from many sponsors or investors through its selling agents and invests it in stocks, bonds and short-term money market instruments, and pays out dividends to the unit holders annually. The SEC in 2007 asked the ICB to bring its mutual funds under 'SEC (Mutual Fund) Rules 2001' so the regulatory agency can control the funds under a set of rules to ensure the investors' interests. Upon a request from the ICB, the SEC then waived the eight mutual funds from its rules, and gave no directions or conditions about their maturity period. The ICB has since been operating its eight mutual funds. But the SEC in December 2009 issued a notification instructing that the mutual funds having no maturity period and that have passed 10 years after listing, to pull out of the market by December 2011.

Tuesday, September 20, 2011

Source: Financial Express

 

The central bank has extended the time-frame by one year for adjustment of 'single borrower exposure limit' by the commercial banks for financing the operations of their subsidiaries, brokerage houses and merchant banks. Under the amended provisions, the banks will have to adjust the excess amount of their loans over the single borrower exposure limits for their respective subsidiaries by December 31, 2012, instead of December 31 this year. "We've extended the time-frame considering the overall situation in the country's stock market," Executive Director of the Bangladesh Bank (BB) SK Sur Chowdhury told the FE Monday. He also said it is a supportive step that would help bring stability in the stock market. The central bank issued a circular in this connection Monday, asking the chief executives of all scheduled banks to follow the latest instructions for adjustment of their excess loans over their single borrower exposure limits concerning their subsidiaries. "However, the existing credit level cannot be increased during the extended adjustment time," the BB said in its circular. The Bangladesh Merchant Bankers' Association (BMBA) welcomed the BB's latest move, saying that it will help bring stability in the country's share market. "The inflow of fresh fund will be increased in the market gradually following the BB's latest move. It will also bring about a positive impact on the market in the long run," BMBA President Mohammad A Hafiz told the FE. The BB has taken the measure against the backdrop of long-lasting falling trend of institutional investment in the market as merchant banks and brokerages houses were under pressure to comply with single borrower exposure limit. As per the previous deadline set by the central bank, the single-borrower exposure limit was supposed to be adjusted by December 31, 2011, instead of the earlier set-period between June 30 and August 31 this year. On May 26 last, the BB extended the time-frame for adjustment of 'single borrower exposure limit' by the commercial banks for financing the operations of their subsidiaries by a maximum period of six months. Currently, 30 commercial banks, out of a total of 47, are running 32 brokerage houses and merchant banks as their subsidiary companies. "Most commercial banks have already complied with their single borrower exposure limits for financing their subsidiaries," another BB official said, adding that at least 11 banks are yet to adjust their excess amount of loans over their single borrower exposure limit. On November 01 last, the central bank asked the commercial banks to finance their subsidiaries, considering them as belonging to the same group, to minimise credit risk. The BB had taken the move against the backdrop of violations of the existing provision about single borrower exposure limit by some of the banks through financing operations of their subsidiaries, considering them as separate entities. Under the existing provisions, the total financing facilities by any bank to any single person or enterprise or organisation of a group are not to exceed 35 per cent of the bank's total capital at any point of time, subject to the condition that the maximum fund-based financing facilities (funded facilities) do not exceed 15 per cent of its total capital base. However, the single borrower exposure limit should remain unchanged in the export sector at the existing 50 per cent of a bank's total capital. But funded facilities, in case of export credit, are not also to exceed 15 per cent of a bank's total capital.

Tuesday, September 20, 2011

Source: Financial Express

 

The government Monday raised the compressed natural gas (CNG) price to Tk 30 per unit (1.0 cubic metre), a 20 per cent hike from the existing tariff of Tk 25 per unit. The Bangladesh Energy Regulatory Commission (BERC) announced the new price, effective from Tuesday saying the hike was necessary in view of the increased prices of petroleum products. The decision to raise CNG price came within a day of the petroleum price hike which has been increased within the range between 6.32 per cent and 19.04 per cent by an executive order. The government raised fuel prices by Tk 5.0 per litre for diesel, kerosene, petrol and octane and Tk 8.0 per litre for furnace oil Sunday. Under the new price, which came into effect Monday, each litre of diesel and kerosene is now being sold in the domestic market at Tk 51, petrol at Tk 81, octane at Tk 84 and furnace oil at Tk 50. "We have increased the CNG price as an interim measure following a price hike plea from Petrobangla," BERC Member Selim Mahmud told the newsmen Monday. Petrobangla stated that the government revenue would increase by Tk 5.59 billion annually following the hike. The energy commission raised the CNG price after four months of the previous hike in May 12, 2011. That time the CNG price was increased by 49.25 per cent from Tk16.75 per unit to Tk 25 per unit. Officials said the recommendation to raise CNG price came from an inter-ministerial meeting Monday. BERC top officials attended the meeting. The meeting suggested to raise the CNG price hike in line with the increased prices of petroleum products. The meeting viewed that the transport owners, both petroleum-run and CNG-run would increase the transport fares no matter whether the CNG price has been increased or not, said an official. Officials, however, feared that the hike might push up prices of food and transportation costs further. Meanwhile, the government has hiked fares of transports Monday following the increase in petroleum and CNG prices. State-run Bangladesh Road Transport Authority (BRTA) increased the fare of CNG-driven bus and minibus by Tk 0.05 per kilometre and CNG-driven auto-rickshaw by Tk 0.14 per km effective from Tuesday. The bus and minibus fare has been increased to Tk 1.60 per km from the previous Tk 1.55 in Dhaka following the hike. For Chittagong the fare for bus and minibus has been increased to Tk 1.50 per km from the previous Tk 1.45. Fare for CNG-driven auto-rickshaw has been fixed at Tk 7.64 per km from the previous Tk 7.50. This is, however, the second hike in fare of transports in the past four months following the hike of petroleum products and CNG prices.

Monday, September 19, 2011

Source: Financial Express

 

The yield -- rate of interest -- on treasury bills (T-bills) rose significantly Sunday, amid the expectation of the commercial banks about higher yield on the government securities in the backdrop of the hike earlier this month in policy rates by the central bank.

The yield on 91-day T-bills reached the range of 8.04-8.05 per cent Sunday from 7.39-7.40 per cent of the previous auction, held on August 21 last while the yield on 364-day T-bills reached, 8.64-8.65 per cent from 7.89-7.90 per cent, according to the auction results. "The yield on T-bills has been fixed in line with the market demand," a senior official of the Bangladesh Bank (BB) told. The yield on T-bills rose following the increase of the central bank's policy interest rates by fifty basis points recently to curb inflationary pressures. The interest rate on repurchase agreement (repo) was re-fixed at 7.25 per cent on September 4 last from 6.75 per cent while the reverse repo rate was increased to 5.25 per cent from 4.75 per cent. Thirteen bids, amounting to a total of Tk 4.14 billion for 91-day T-bills and 14 bids, to a total of Tk 2.45 billion for 364-day T-bills, were offered. Of those, 13 bids, amounting to a total of Tk 4.0 billion for 91-day T-bills and 14 bids, amounting to a total of Tk 2.45 billion for 364-day T-bills, were accepted, the central bank said in its auction result Sunday. Besides, Tk 50 million were devolved on primary dealers (PDs) for 364-day T-bills, it added. The central bank earlier selected 15 PDs - 12 commercial banks and three non-banking financial institutions (NBFIs) - to deal with government securities in the secondary market. "We've quoted the higher yield on the T-bills in line with the BB's latest signal on policy interest rate," a senior treasury official of a leading private commercial bank told the FE. He also said the yield on 182-day T-bills may increase in the next auction, which is to be held next week. On September 11 last, no bid of 182-day T-bills was accepted as the PDs quoted higher yield on the government short-term security to minimise their cost of fund. "The overall interest rate level in the financial system may rise further in line with the government's aim to curb inflationary pressure on the economy," the treasury official noted.

Sunday, September 18, 2011

Source: Financial Express

 

The uniform face value of all stocks listed on stock markets at Tk 10 will be effective from December 04 next, the Securities and Exchange Commission (SEC) has announced, reports bdnews24.com. "The shares of listed companies and mutual funds priced higher than Tk 10 have to be changed by November 30 after all formalities," a Securities and Exchange Commission (SEC) order, circulated Thursday, said. "Dec 1 will be the record date, while trading will begin with the new uniform face value from Dec 4," it adds. Dec 2 and 3 are weekly holidays. Trading of the shares of the companies missing the deadline will be halted, the order says. The latest decision came on Aug 23 after the SEC decided to fix the face value at Tk 10 as per a proposal from the committee formed to investigate the Dec-Jan share market scam. The committee in a report said a certain quarter had pushed the prices of shares without logic by lowering the face value. The finance ministry had decided on the Tk 10 ceiling several years ago. But the decision had not been made mandatory for all to adhere to. Some companies had fixed the face value at Tk 10 per share following the finance ministry decision at that time.

Thursday, 15 September 2011

Source: New Age

The board of directors of the Bangladesh Bank on Wednesday decided in principle to allow the setting up of more private commercial banks in the country. The board, headed by BB’s governor Atiur Rahman, also finalized the draft guidelines necessary to establish new banking companies after making some changes. Finance secretary Mohammad Tareque left the meeting within half an hour after the meeting started. The BB decided to allow more banks in the country in response to pressure from the government which wanted to give licenses to new banks, reportedly on ‘political considerations’, although former governors of the BB and economists criticized the decision on the grounds that the existing 47 banks were enough, considering the size of the economy. The board set the application fee for the new banks at Tk 10 lakh, which is non-refundable. The amount was Tk 8 lakh and refundable in the draft guidelines. According to the new conditions, loan defaulters and tax defaulters cannot apply for licenses, and whether or not they are defaulters will be determined by their statements for the last five years. Moreover, if any person has obtained status quo from the court, he will not able to apply for setting up a new bank until the final decision has been made. It said that the ratio of urban to rural bank branches has to be 1:1 or as per instructions issued by the BB from time to time. According to the guidelines, the initial minimum capital of Tk 4 billion shall be provided by sponsors of the proposed new commercial bank, and the bank shall issue public shares within three years after the date of commencement of its business. ‘Public issues shall be at least equal to the sponsors’ share amount,’ said the guidelines. The number of directors in the board must not be more than thirteen. The chief executive officer of the proposed bank shall have at least 15 years of experience in the banking profession. At present, each commercial bank maintains a total capital of Tk 4 billion and a minimum of Tk 2 billion has been added as paid-up capital out of the total capital. The minimum shareholding stake of each sponsor will be Tk 10 million instead of the existing Tk 2.5 million, and the maximum will be 10 per cent of the proposed bank’s total share capital, according to the guidelines. The guidelines say that this ceiling of 10 per cent applies to an individual, company or family member, either personally or jointly or both. ‘The new bank has to ensure the channeling of at least 5.0 per cent of its total lending into the agricultural sector or as per instructions issued by the central bank from time to time,’ said the guidelines. The Bangladesh Bank’s data shows that at present there are 47 banks in the country, of which four are state-owned commercial banks, four are specialized banks, and 30 are private commercial banks of which nine are of foreign origin.

Wednesday, September 14, 2011

Source: Financial Express

 

Bangladesh Bank has assured the securities regulator of extending the timeframe for adjusting single-borrower exposure limit by the commercial banks for financing the operations of their subsidiaries -- brokerage firms and merchant banks, officials said. The announcement came Tuesday at a joint press briefing organised by the Securities and Exchange Commission (SEC) and merchant bankers after holding a scheduled meeting on merchant bankers' demands. "The assurance of extending timeframe for adjusting single borrowers' exposure limit came from Bangladesh Bank (BB). The BB said it would remain flexible in adjusting the limit," SEC Executive Director Mohammad Saifur Rahman told reporters. On Tuesday the country's main bourse -- Dhaka Stock Exchange (DSE) -- started bouncing back from the downtrend just after 40 minutes of the day's trading session, when it was heard that the timeframe to adjust exposure's limit is likely to be extended. Finally, the main bourse DSE ended its session with a notable gain of 2.26 per cent, mainly riding on the disclosure. However, Mr. Rahman was not able to say about the possible time-extension for adjusting the limit. As per the latest deadline set by Bangladesh Bank, the single-borrower exposure limit was supposed to be adjusted by December 31, 2011. At the press briefing, Mohammad A Hafiz, the president of Bangladesh Merchant Bankers Association (BMBA), said they have demanded the extension up to 2014. Mr. Rahman said there is nothing to be worried about the banks' investment limitations in the upcoming amendment to the Bank Act, as it would take a significant time to finalise the Act. Mohammad Jahangir Mian, the chief executive officer of Janata Capital and Investment, said as per existing provision the commercial banks can invest an amount equivalent to 10 per cent of their individual liabilities in the stock market. "The SEC has told us that it would urge the commercial banks to comply with the investment provision, as some banks are yet to fulfil their allowable limit," Mr Jahangir said. SEC Executive Director Mohammad Saifur Rahman said the regulator has also assured the merchant bankers of paving the way of creating funds in an effort to overcome their liquidity crisis. "The funds will not be borrowing-based. Their own funds will be created by issuing bonds, debt securities and through the initial public offering (IPO) and foreign direct investment (FDI)," Mr Rahman said. BMBA president Mohammad A Hafiz said they have urged the regulator to help the merchant banks in creating their own funds, as the banks are in acute liquidity crisis. "The regulator has told us that it has no objection to fund creation," the BMBA president said. At the meeting, the securities regulator has taken another decision to fix a provision, which will compel the sponsors and directors to hold a certain volume of shares in their hands. "The decision came following some recent incidents of selling out a significant volume of shares by some sponsors and directors even during the sharp declining trend in the market, which had added to the prevailing panic in the market, Mr Rahman added. He said the regulator would make an announcement shortly on the minimum volume of shares to be held by the sponsors and directors. The securities regulator and merchant bankers have come up with forming a nine-member committee named "Recommendation and decision establishment committee". An SEC executive director and the secretary general of BMBA will be the convener and member-secretary respectively of the committee.

Tuesday, September 13, 2011

Source: The Daily Star

 

 

Dhaka Stock Exchange became the worst performer in Asia this year, ridiculing the premier bourse's ranking last year when it was the third among the global best, according to Bloomberg News. The Dhaka bourse lost 25 percent in the last nine months this year, while its general index advanced 82.81 percent last year. The steep fall in the indices was mainly due to various topsy-turvy initiatives by the stock market regulator and the central bank, said analysts. Prof Mahmood Osman Imam, a teacher of finance at Dhaka University, said: “The initiatives of the regulator and the central bank created a credit crunch that dented the investors' confidence and pulled down the market.” Bangladesh's stock market at first bubbled and then burst following sharp but irrational gains last year, said Imam, also a member of the index development committee of the Dhaka Stock Exchange. Imam said the government missed a great chance last year to collect funds for developing the country's infrastructure. New issues and market friendly initiatives are important for developing the markets, said Imam. The government should go for motivational packages for high profile non-listed firms to encourage them to be listed on the bourses, he added. However, he said the authorities of many non-listed firms do not want to lose control on management and are not interested to follow the listing rules. The current price earnings (PE) ratio, which is 16.34 on September 6, is lucrative for long term investment, said an official of the Securities and Exchange Commission. “We are working hard to develop the country's stock market as all kinds of rules and regulations will be reformed soon,” he said. However, he said various domestic factors such as soaring inflation and high interest rates for borrowing money dampened investors' confidence. The Bangladesh Bank has increased the policy rates for the fifth time in the last 13 months as non-food inflation soared in the last few months. The central bank recently raised the repurchase rate, at which it lends to commercial banks, to 7.25 percent from 6.75 percent. The reverse repurchase rate was hiked to 5.25 percent from 4.75 percent. Market capitalization declined by Tk 60,126 crore in the last nine months and now stands at Tk 290,674 crore. In 2010 market capitalization gained 84 percent and reached Tk 350,800 crore. The Indian stock market, hit by global woes and a high inflation-interest rate regime, has been the second-worst performer in Asia this year, according to Bloomberg. The Bombay Stock Exchange Sensitive Index, or Sensex, declined about 18 percent so far this year. Most Asian markets lost between 10 percent and 15 percent this year, as a worsening euro zone debt crisis and fears of a double-dip recession in the US have eroded investors' confidence.

Monday, September 12, 2011

Source: Financial Express

 

The central bank has asked the non-banking financial institutions (NBFIs) to submit their respective statements of large loans or lease facilities to its department concerned on quarterly basis, officials said. Under new provisions, a loan or a lease sanctioned to any individual or business entity or business group amounting to 15 per cent or more of the total capital of an NBFI will be considered as a large loan. "We've taken the latest move with a view to minimising the credit risk of the NBFIs through diversifying the exposure of their loan portfolios," a senior official of the Bangladesh Bank (BB) told the FE. He also said the NBFIs will have to maintain provisions against large loans like the commercial banks to ensure discipline in the country's financial sector. The central bank has issued a circular in this connection recently and asked chief executives and managing directors of all NBFIs to comply with the new directives on large loans or leases properly. All types of direct and indirect loans or lease facilities will be considered while calculating the large loans or leases. But all types of indirect loans or leases will be calculated as 50 per cent of credit equivalent, according to the circular. "The NBFIs will have to submit the statements on large loans in specified format to the BB's Department of Financial Institutions and Markets within 15 days after the end of the respective quarter," another central banker said. For the disbursed loans or leases that exceed the limit, the NBFIs are allowed to take necessary steps to bring down the loan or lease amounts within the specified timeframe, he added. He also said the NBFIs concerned may, if necessary, arrange partaking with other financial institutions to comply with the rules. Currently, 30 NBFIs are running their business in the country. "We'll comply with the large loan or lease provisions in line with the BB's requirements," Managing Director of the Industrial and Infrastructure Development Finance Company Limited (IIFDC) Assaduzzaman Khan told the FE.

Tuesday, September 06, 2011
Source: Financial Express


The central bank has published draft guidelines to establish new banks imposing a restriction to keep the number of directors in their board within 13, officials said. Under the draft guidelines, the paid-up capital of a new commercial bank will have to be Tk 4.0 billion as required under Bank Company Act 1991. The share capital will be formed with ordinary shares only. Any interested individual can submit his/her opinions to the general manager of Banking Regulation and Policy Department (BRPD) of the central bank through e-mail or by normal post as early as possible, the BB officials said. "The Board may take a final decision on setting up new private commercial banks (PCBs) in the next meeting," another BB official said. The central banker also said the BB will publish an advertisement for inviting fresh applications from interested entrepreneurs to establish new banks, if the Board gives its approval for allowing new PCBs to operate. On August 24 last, the Board kept in abeyance a proposal to issue lincences for new PCBs. "The initial minimum capital of Tk 4.0 billion shall be provided by sponsors of the proposed bank," the Bangladesh Bank (BB) said in its draft guidelines, adding that the bank shall issue public shares within three years from the date of commencement of the banking business. "Public issues shall be at least equal to the sponsors' share amount," it added. Currently, the commercial banks maintain a total capital - paid-up and reserve - of Tk 4.0 billion, while a minimum of Tk 2.0 billion has been added as paid-up capital out of the total capital. The minimum shareholding stake of each sponsor will be Tk 10 million instead of the existing Tk 2.5 million and the maximum will be 10 per cent of the proposed bank's total share capital, according to the guidelines. "This ceiling of 10 per cent applies to an individual, company or family member, either personally or jointly or both," it added. "Family" is defined herewith to include spouse, father, mother, son, daughter, brother and sister of the individual or anyone dependent on that individual. "The number of members of the board of directors shall be restricted to 13," the guidelines said, adding that the chief executive officer (CEO) of the proposed bank shall have at least 15 years' experience in the banking profession. Relating to the branch expansion policy, the guidelines said the ratio of urban and rural bank branches has to be 1:1 or as per instruction issued by the BB from time to time. "The new bank has to ensure financing at least 5.0 per cent of its total lending into agricultural sector or as per instruction issued by the central bank from time to time," it added. Currently, all PCBs and foreign commercial banks are fixing agriculture credit disbursement target at least at 2.5 per cent of their total loans.

Monday, September 05, 2011
Source: Financial Express


The central bank has increased its policy interest rates by fifty basis points after more than two months to curb inflationary pressures on the economy, officials said. The interest rate on repurchase agreement (repo) was re-fixed at 7.25 per cent Sunday from 6.75 per cent while the reverse repo rate was increased to 5.25 per cent from 4.75 per cent. The new policy interest rates come into effect from today (Monday), a central bank announcement said Sunday. "We've increased the policy interest rates aiming to curb the recent upward trend of inflation," General Manager of the Monetary Policy Department of Bangladesh Bank (BB) Sultana Razia told the FE. She also said the central bank has used its monetary instruments to manage the country's overall macro-economy properly. The latest BB move came against the backdrop of the increasing trend of inflation in the recent months because of the increase in prices of both food and non-food items. The rate of annual average inflation as measured by the consumer price index (CPI) went up by 0.31 percentage point to 9.11 per cent in July from 8.80 per cent of the previous month while the point-to-point inflation rate rose to 10.96 per cent from 10.17 per cent. "We've increased the policy interest rates like repo in line with our latest monetary policy statement," another BB official said, adding that it will help to contain inflationary expectation through increasing cost of borrowing funds in the coming months. On July 27 last, the central bank unveiled its half-yearly monetary policy aiming to contain inflationary pressures through discouraging credit flow to unproductive sectors including real estate and for speculative purposes like investments in stock market beyond affordable limits. The food price inflation rose to 13.40 per cent in July last from 12.51 per cent of the previous month while that of non-food items reached 6.46 per cent from 5.73 per cent on point-to-point basis, according to Bangladesh Bureau of Statistics (BBS) data. "We expect that the inflationary pressures might ease by the end of the first quarter of this fiscal year," the central banker said. On June 14 last, the central bank raised the interest rate on repo to 6.75 per cent from 6.25 per cent while reverse repo interest was re-fixed at 4.75 per cent from 4.25 per cent, the BB data showed. "Such policy intervention does not work immediately but it will involve some time-lag for its expected impact due to a weak monetary transmission channel in Bangladesh," the BB official said while replying to a query. In India, the policy intervention works promptly because of an improved monetary transmission mechanism there, the BB official noted. The market operators, however, said that the BB's latest move would influence the interest rates on both lending and deposit sides of the banks. "No doubt, the latest BB move will hit the country's banking industry. The rising policy interest rate may discourage credit flow to the private sector, particularly less productive sectors, in the near future," a senior treasury official of a commercial bank told the FE without elaborating.

Wednesday, 24 August, 2011
Source: The Financial Express


The central bank has proposed to amend the existing regulations relating to capital market investment by the country's commercial banks to minimise risks, officials said Tuesday. Under the proposal, the commercial banks should not be allowed to invest more than 25 per cent, in any form, of their total equity capital in the share market. A bank is now allowed to invest in capital market up to an amount, not exceeding 10 per cent of its total liabilities. "We've taken the latest move to protect the depositors' interest," a senior official of the Bangladesh Bank (BB) told the FE, adding that the central bank has released a 32-page amendment proposal of the Bank Company Act 1991 for seeking opinions from the members of the public. He also said any interested individual can submit his/her opinions to the general manager of Banking Regulation and Policy Department (BRPD) of the central bank through e-mail or by normal post by September 15. "We'll submit a complete proposal incorporating the public opinions to the ministry of finance (MoF) for taking necessary measures in this connection," the central bank official added.

Currently, the banks are allowed to invest 10 per cent of their liabilities (deposits) in the share market in line with the section 26 (2) of the Bank Company Act 1991. Under the existing rules, holding of equity share in any form should not exceed the approved limit under section 26(2) of the Bank Company Act. Additional or unauthorised amount of holding will be deducted at 50 per cent for Tier-1, generally known as core capital and 50 per cent from Tier-2, generally known as supplementary capital. In April last, the International Monetary Fund (IMF) suggested for an amendment to the regulations relating to investment in stock market by the banks to minimise their risks. A five-member Money and Capital Market (MCM) team of the IMF had submitted its report in this connection to the MoF and the central bank for taking necessary measures. The central bank has estimated that if any bank invests 10 per cent of its deposits and if the share price slides by 25 per cent from its purchase price, the bank's capital adequacy ratio will decline by a minimum of 2.0 per cent. The BB has already informed all commercial banks of the results of such stress test for taking necessary measures in this connection, another BB official said adding the IMF provided technical support for conducting stress test for the banks in 2009.

Source: The Daily Star
Date: 14 August 2011


More than 450 applications have been piled up in the financeministry for new insurance company licenses, with three to four newapplications being submitted every day. Applicants include many from the rulingparty high-ups and businessmen. “We're getting three to four applications fornew companies every day. We did not see such a rush before,” said an officialof Insurance Development and Regulatory Authority (IDRA). The total number ofapplications lying with the authority is more than 450 now, said the official. Amad rush to get a licence started after the finance minister announced in lateJune that new banking and insurance companies would be allowed in the market.The Awami League-led government in its previous regime (1996-2001) also issuedmore than a dozen of licences for new insurers; even three were given on thelast day of the government. The issue has already raised debates as analystsand industry players think the move would make the already saturated insurancesector more crowded and difficult to regulate for the newly established IDRA. Thereare 62 insurance companies operating in the country. Of them, 43 are generalinsurers and 17 life insurers. The remaining two -- one life and anothernon-life -- are owned by the government. The total premium earned by lifeinsurers was nearly Tk 5,000 crore in 2009, up 28 percent from 2008. Non-lifecompanies' premium grew by 13.71 percent to Tk 1,390 crore in 2009. Many of theinsurance companies are non-transparent and run on ambiguous policies. A lot ofallegations are also there on the delay or 'non payment' with claimsettlements. The industry is also run by under-quality staffs. Amid thiscritical condition, the finance ministry continues the work of issuing new licenses.Though the government passed two insurance laws in March last year tostrengthen the regulatory framework and make the industry operationallyvibrant, it has so far appointed only a chairman and four members in the IDRA.No other manpower and logistics have been given in the past one and a halfyears to run the sector. A senior finance ministry official said the governmentis thinking to issue some new licenses in the life insurance segment, not forthe general ones. On the huge demand for new licenses, he said, “We receiveapplications on white papers and every body has the right to seek licenses.” Insuranceveteran Islam also agreed with the finance ministry official, saying that a fewlicenses can be given to the life insurance segment, considering the growingpopulation and the services required.

Professor Dr. M. Khairul Hossain joined the Securities and Exchange Commission as its Chairman on May 15, 2011. He is a Professor of Finance at Dhaka University and possesses wide knowledge on capital market. Prior to joining SEC, he was serving as the Chairman of Investment Corporation of Bangladesh (ICB). Government has appointed him as the Chairman of the Commission for a period of three years.