Bangladesh's main stock exchange records biggest crash ever
Bangladesh's premier bourse, Dhaka Stock Exchange (DSE) on today witnessed its biggest ever slide, with a fall of 551.76 points or 6.72% in a single day, sparking a street protest in the capital city.business Updated: Dec 19, 2010 22:11 IST
Bangladesh's premier bourse, Dhaka Stock Exchange (DSE) on Sunday witnessed its biggest ever slide, with a fall of 551.76 points or 6.72% in a single day, sparking a street protest in the capital city. The stocks began to nosedive almost immediately after trading began and almost 200 points were wiped off in an hour, as the benchmark general index dipped to 7621 points.
However, the index did affect a slight turnaround and ended up at 7654 by the close of the session.
The previous highest fall on a single day was 285 points or 3.31% on December 12 this year, that also saw protests by investors on the street. Stock brokers said the recent rise in the Statutory Liquidity Reserve (SLR) and Cash Reserve Ratio (CRR) caused the plunge in stocks, as the increase prompted banks and financial institutions to pull out substantial investments from the bourse.
The Bangladesh Bank earlier asked banks to issue directives to their borrowers to adjust their "dubious loans" by this month, which they borrowed citing specific reasons but invested in other areas, including the stock market.
The central bank from December 15 this year also increased the SLR and CRR by 0.5% to 18.5 and 6%, respectively, inflating the call money rate to a blasting trajectory and alerted all banks to bring down excess over limit exposure in the stock market by the end of December this year.
But the debacle prompted the central bank to convene a joint meeting with regulatory Securities and Exchange Commission (SEC) and come up with a decision to increase the timeframe to February 15, 2011, for the credit adjustment by the borrowers. The SEC also decided to increase the margin loan ratio to 1:1.5 from 1:1, increase margin loan, a credit facility offered to shareholders against their stocks.
Bangladesh Bank officials, however, said they decided not to deviate from its tight monetory policy. Witnesses said several hundred investors took to the street, as the index fell by 300 points, clogging thoroughfares at the central Motijheel business district in the capital prompting police to take position in riotgears.
The protesters shouted slogans against the Bangladesh Bank governor Atiur Rahman and demanded removal of DSE president Shakil Rizvi.