'500-point fall only normal'

Former SEC head Mirza Azizul Islam lists his reasons behind Sunday's stock market crash.

Dhaka, Dec 19 (bdnews24.com) — A former head of the capital market regulator finds that a 550-point fall was normal.

The former chairman of Securities and Exchange Commission said he had held for a long time that the market was overvalued and expected the volatility to calm down after December.

AB Mirza Azizul Islam, also a former finance adviser of the last military-installed interim regime, made the observations in a statement issued on Sunday when the stocks saw a record fall of 551 points sparking angry protests on the streets.

This fall comes within a week of another sharp fall of 285 points on Dec 13.

Azizul Islam told bdnews24.com on Sunday the current share market looks overvalued to him. "I and the SEC chairman, the DSE and CSE presidents and market analysts have been saying for quite some time that the market is overvalued."

"An 8500-point index is nowhere near normal for this market. It should be within 6000 to 6500."

He tried to quell apprehensions that the market might see another fall like that of 1996, saying, "DSE index was 3600 in 1996. That index reached 8500. It is only natural that it should fall 500 points."

"Naturally the market is going through a price correction."

Mirza Aziz saw several reasons behind the sudden fall.

"The government's decision of contracting liquidity, followed by the liquidity crisis in banks and high call money rates is one reason."

"But the fact that this is the last month of the year and many institutions are selling off shares to coordinate accounts also played a significant role."

"Also, many investors seeing the prospect of large profits sold off their shares. That also pushed the prices down. The average investor got scared and followed suit, causing a chain effect."

But the fear is baseless, he said. "If investors pay heed to rumours, they will be more likely to suffer losses. They need to be cautious about selling or buying shares."

The former SEC chairman also advised the government on steps to keep the capital market stable.

He mentioned the coordination committee formed during the caretaker government with top officials of the finance ministry, Bangladesh Bank and SEC.

"The committee met on Sunday after the price fall. But it should meet regularly."

"The government should also release the shares it is supposed to as early as possible," he added.

The Dhaka Stock Exchange saw its worst single day fall on Sunday losing 6.71 percent.

This dramatic fall triggered a protest around the Dhaka Stock Exchange shortly after noon, disrupting traffic around Motijheel commercial district.

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