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SME board gets a boost from block market

The scope of bulk transactions is believed to have raised investors' confidence in listed securities on the platform

Babul Barman | May 30, 2023 00:00:00

The SME index of the Dhaka Stock Exchange increased 17 per cent, or 178 points, to 1,220 in the seven days since the beginning of bulk share transactions on the platform to Monday.

Though buyers and sellers have not shown much interest in trading in the block market, listed SMEs have been climbing with high volumes of shares traded.

The overall turnover increased significantly as the facility boosted investors' confidence, said Sajedul Islam, senior vice president of the DSE Brokers Association of Bangladesh.

"Trading on the SME board will go further up in near future," said Mr Islam, also managing director of Shyamol Equity Mana-gement.

The SME index witnessed the highest single-day turnover in eight months at Tk 154 million on Sunday.

Meanwhile, only two companies -- Himadri and Krishibid Seed -- saw shares worth Tk 6.69 million change hands in block trading.

Krishibid Seed had 40,000 shares traded at Tk 22 each on May 23 while its 90,000 shares changed hands at Tk 28 each on Monday.

Himadri, which runs six potato cold storage units in the northern part of Bangladesh, had 32,062 shares transacted in the block market at Tk 102.50 each on May 24.

The block market is for bulk selling and buying executed on an automatic-matching-with-equal-quantity-and-market-price basis.

The features of block trades on the SME board are similar to the main board in compliance with the 1999 Dhaka Stock Exchange Automated Trading Regulations.

As per the regulation, the minimum market value for a bulk lot of a certain security shall be Tk 0.5 million at the existing share price unless any other deal is fixed by the board with the approval of the regulator.

Usually, trading on the block board is negotiated by stock brokers. Sellers put forward amounts and rates at which they would like to sell securities, and brokers deliver the information to interested buyers.

After the deal settlement, information about the block transaction is posted on the bourses.

Saied Mahmud Zubayer, a deputy general manager of the DSE, earlier told the FE that the benefit of block transactions is that trading can be executed at the lowest or highest price within the circuit breaker.

"The transaction fee on the block board is also half the fee charged in usual transactions," he said.

The trade fee in the main board is 0.025 per cent of transaction value, which is reduced to 0.0125 per cent on the block board when the trade volume amounts to Tk 5 million or above.

Mr Zubayer said bulk transactions are done in the block board instead of the main board to avert any negative impact on the market price of the company involved.

Share trading on the SME platform started on September 30, 2021 creating an opportunity for small and medium enterprises (SMEs) to raise capital from the stock market, a move aimed at helping them reduce debt burden, enhance corporate profile, and create optimal value.

The platform came into being with the belief that many small companies have good business potential but are unable to reach their desired goals due to a lack of scope of raising funds.

Trading began on the DSE's SME board with just six companies. At present, the number of companies listed on the board is 16.

A new SME firm -- Al-Madina Pharmaceuticals made its debut on the SME board on Monday.

The veterinary drug maker's stock price jumped 10 per cent, the highest allowable price limit, to close at Tk 11.

Any investor having an investment of Tk 2 million in listed securities of the main board and registered with the electronic subscription system of the stock exchanges is considered eligible for trading on the SME board.

The investment figure is calculated based on the market value or cost, whichever is higher as per the portfolio statement.

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