BAB announces launching of market stabilisation fund

AppId is over the quota
AppId is over the quota
FE Report

Private commercial banks (PCBs) announced Sunday the launching of a Tk 50 billion stock market stabilisation fund (SMSF) to help revamp the country's stock market.

They will initially invest Tk 10 billion in the proposed fund, the size of which will be enhanced gradually.

The announcements came after an emergency meeting of the Bangladesh Association of Banks (BAB), a platform of owners of PCBs, held at its city office on the day with its Chairman Nazrul Islam Mazumdar in the chair.

At the meeting, the BAB decided that each of its member-banks would contribute Tk 200 million to the proposed SMSF while an amount of Tk 100 million would come from non-banking financial institutions (NBFIs), insurance companies and interested publicly listed companies.

Sixteen out of 29 BAB members attended the meeting while Chairman of the Bangladesh Insurance Association Sheikh Kabir Hossain was also present as an invited guest.

"We've decided to establish the fund aiming to bring back stability in the country's stock market," the BAB chairman told reporters after the meeting, adding that the fund will go into

operation shortly after receiving its approval from the central bank and the capital market regulator.

"We think that the PCBs will not face any hurdle to invest Tk 200 million to the fund," Mr Mazumdar said while replying to a query.

Some banks have already started making fresh investment in the stock market, he said, adding that the banks may invest Tk 400 billion-Tk 450 billion in the market.

The BAB chairman also said the fund will be operated like a mutual fund and its size will cross Tk 50 billion.

"An asset management company (AMC) will operate the fund in line with the existing rules and regulations," President of the Bangladesh Association of Publicly Listed Companies (BAPLC) Salman F Rahman said, while replying to a question.

The BAB has asked its member-banks to confirm their firm commitment to making their investment in the proposed fund by October 31 this year.

Another meeting of the BAB will be held after receiving such commitments from its member-banks, a private banker close to the BAB told the FE.

The meeting discussed in details the possibilities for participation of other financial institutions, insurance companies and publicly listed companies as sponsors of SMSF, in addition to that of banks. This was indicated in a working paper on the fund that dealt with issues on which decisions were required.

After discussions, the decision was taken in favour of such participation by financial institutions other than banks.

Three-page working paper, which was placed before the BAB's meeting on Sunday, also indicated the SMSF would be managed by a new AMC whose paid up capital would be Tk 100 million to be subscribed by the sponsors of the SMSF on a pro rata basis of 1.0 per cent of the contribution to the fund.

"This amount will be in addition to the sponsors' contribution to the fund," it said, adding that the board of directors of the AMC will comprise reputed and competent persons of the society, not in any way related to the sponsors of the SMSF.

The board of directors of the AMC will appoint a professional chief executive officer (CEO) who will be responsible for the day-to-day management of the AMC, according to the paper.

Source: thefinancialexpress-bd.com

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Intel report suggests 18pt steps to resuscitate stock market

Nazmul Ahsan

An intelligence report has blamed the central bank, the securities regulator and "dishonest" sponsor-directors for the recent stock debacle, saying the market needs radical steps such as waiver or reschedule of interest on margin loans to revive its flagging fortune.

The report, a copy of which has been obtained by the FE, comes up with an 18-point suggestion to stabilise the plunging market including slowing down the legal action against the suspected scamsters in an effort to steer stocks out of the red-zone.

In a scathing critique on the forces it believes were behind the market crash, the report called for punitive action against the errant merchant banks, saying these financial institutions are not playing their due roles to boost trading.

The report pinpointed the blame for the market debacle on the Bangladesh Bank, the Securities and Exchange Commission (SEC) and the greedy investors who did not think twice to invest their life-long savings on junk shares.

It said the immoral activities of sponsor-directors of the listed companies in 2009 and 2010 also had a "significant role" in spiking share prices abnormally during the period, when the benchmark DGEN index gained more than 80 percent a year.

Citing SEC data, it said the sponsor directors took away Tk 24.27 billion from the market in the 2010-2011 fiscal year by selling parts of their stakes at high prices.

It asked the authorities to force these directors to invest at least 30 per cent of their firms' paid-up capital in the market as part of new measures to rescue the dipping bourses.

The report suggested that the SEC shorten the duration of lock- in period for placement shares in order to boost liquidity flow in the fund-starved exchanges.

The similar practice of loan rescheduling by scheduled banks may be introduced by the merchant banks and brokerage houses for margin loan defaulters, the report said.

"Initiative may be taken to waive the interest of margin loans for a particular period," according to the report, which has been sent to Prime Minister's Office (PMO), recently.

The report by a key intelligence agency also called for introducing two-day duration for share transaction settlement from the current three days, simplification of netting system and reducing charges of CDBL (Central Depository Bangladesh Ltd) by a third.

Among other key measures, it suggested a move to stop forced-sale of distressed portfolio, buying back share by directors of listed companies at fixed prices and lifting all existing taxes from the earnings to be generated from the mutual funds.

It asked the authorities to take punitive action against the rogue merchant banks, who benefited from the market when the index was abnormally high but are now shying away, and consider issuing new merchant bank licenses in a bid to bump up competition.

The dossier also called for government policies to help invest a significant portion of reserve funds of scheduled banks in the capital market and undertaking efforts to invest life insurers' Life Fund worth billions of taka in stocks.

Quoting BB statistics, it said scheduled banks earned one-third of their operating profits, or Tk 29.39 billion, from the share market in 2010. Of the total, private commercial banks (PCBs) alone earned Tk25.59 billion, which they kept as reserve.

"The reserve fund worth Tk 25.59 billion may be invested in the share market to (pump up) liquidity and (revitalise) the moribund market," reads the report.

The report said BB should ask all scheduled banks to invest 10 per cent of their liabilities in the capital market.

The aggregate investment of banks in the capital market as of October 15 was less than four per cent, a BB high official said.

The report also recommended a slow-down in legal action against the individual and institutional investors who have been accused of manipulating the market during the December-January crash.

Such "slowing process" may be taken in phases in the interest of market stabilisation, the report said.

The report suggested humane handling of the retail investors who have staged sit-ins and demonstrations to protest the debacle. It said the law-enforcing agencies should not be "rude" at the agitating small investors.

The report also backed a government move to woo undisclosed, or so-called black, money in the stock, urging the authorities to make an announcement assuring these money holders that they would not face any harassment from any agencies.

It said an increase in the Statutory liquidity Requirement (SLR) and Cash Reserve Ratio(CRR) by 0.5 per cent by the central bank earlier this year caused liquidity crisis in the market.

The report suggested the top officials and dignitaries make "sensible remarks and statements" on share market taking into account sensitivity of its nature.

Blaming BB, the intelligence report said the BB top brass lacked prudence when they allowed the scheduled banks to invest up to 30 per cent of their liabilities in the share market in 2010 defying relevant regulations.

Officials in the Ministry of Finance said they are pursuing all these suggestions made by the intelligence agency.

"As per the suggestions, the revenue board has already extended some tax exemptions and rolled back some taxes, while share transaction settlement time has been reduced," a top official in the ministry said.

Source: thefinancialexpress-bd.com

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A run for money can Android app market give Apple APP store in 2011

The success, Apple has managed to get with its APP store is more than impressive. The other competitors could see this success from afar with jealous eyes. Well, things can change a bit in 2011 as the Android is the leading platform for smartphones. Google could not have earned to a lot of money directly through the development of Android OS, but it certainly happy to see that Android is created as the leading platform of smartphones in the world in 2011. So the app developers are certainly try, to develop applications for Android market, or you will certainly lose something.  I don't think that Apple must be concerned about the onslaught of Android app market in 2011 essentially for two reasons. First of all the iPhone user base will continue to grow. Also, Apple already market dominance in the Tablet PC device industry with its iPad. In 2011 Apple will make even greater in the Tablet PC industry this dominance. Secondly, when it comes to paid apps, Apple store is doing much better than Android market. So, is to make still more money from paid apps Apple even in 2011.

View the original article : Bangladeshi News