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IMPACT OF STOCK MARKET FLOOR PRICE
Banks’ Tk 16,000cr investments remain stuck for one year
AHSAN HABIB and MIR RASHIDA SULTANA
Banks’ investments of more than Tk 16,000 crore have remained almost stuck in the stock market for the last one year owing to a thin presence of buyers amid the floor price, which has hit lenders’ bottom line and brought down their liquid assets.
The Bangladesh Securities and Exchange Commission (BSEC) set the floor price of every stock to halt their free fall amid global economic uncertainties brought on by the dragging coronavirus pandemic in 2021.
The floor price, the lowest price at which a share can be sold, was lifted for 169 companies in December before being reintroduced again in March this year as economic uncertainty deepened.
Fifty-three banks invested Tk 16,314 crore in the stock market in 2022, up from Tk 15,101 crore in the previous year, according to their financial statements.
But the investments yielded almost no capital gains, which stem from the rise in the value of securities, last year as stocks were not tradable in the absence of buyers. Their only consolation came from dividends, which were largely flat in 2022 compared to a year ago.
Bankers describe the floor price-induced situation as unique for them, saying banks don’t prefer to invest in stocks that are not liquid.
“The floor price has put us in a tight spot,” said a banker.
Muhammad A (Rumee) Ali, a former deputy governor of the central bank, said globally banks don’t invest in stock markets, but in Bangladesh, they are encouraged to invest in the stock market.
“But since a stock market investment carries risks, there should have a proper guideline.”
The noted banker thinks banks should not invest in the stock market. Rather, they should lend to entrepreneurs.
All local private commercial banks have investments in the stock market but the proportion is higher among state-run banks.
Six state-run lenders collectively invested Tk 5,904 crore last year in the stock market, representing 36 percent of the total investment of the banking industry.
Sonali Bank invested Tk 2,167 crore in 2022, the highest among the lenders. The second highest investment came from Janata Bank and it stood at Tk 1,775 crore.
National Bank’s investment was Tk 868 crore, the third highest.
“There was no scope to rebalance the portfolio and make capital gains in 2022 as stocks were depressed,” said Md Moniruzzaman, managing director of Prime Bank Securities.
He said banks earned money in the form of dividend gains last year on their investments.
A top official of a merchant bank says if banks see that their stock market investment may become illiquid, they will not make further investment in the market.
“It may impact the market negatively in the long run.”
Investment income from “No