Listing of Second ICB NRB Mutual Fund

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I refer to the report of published in the FE on July 28, 2008, on the listing price of the above-mentioned scrip. The listing of security reveals the opening price and many sales and many buys. It is a generally accepted behaviour that on the first few days when there is no circuit breaker the shares start at an abnormally high price. People forget the fundamental value of shares and do foolish things. While one may understand that is difficult for the most investors to value ordinary shares of companies, this should not be a problem when dealing with mutual funds.

After all it is very easy to determine the value of a fund based on its Net Asset Value (NAV). NAV is, after all, the liquidation value of all the shares in the portfolio of the mutual fund. In any new listing, one would, therefore, guess that the starting value of a mutual fund would be less than the offer price. This is because while you may have put in Taka 100 per shares in the IPO, it is no longer Taka 100 because the offer and issue expenses have to be deducted. So the starting point should be at a discount that is below Taka 100. But the reality of our market is strange and irrational and funds often start to trade at a premium to NAV. This is exactly what happened on July 27 last to the Investment Corporation of Bangladesh Non-Resident Bangladeshis (ICB NRB) mutual fund which started trading at an absurd value of Taka 200. Surely the investors would have got twice the shares for the same money if they had reached out for the basic shares and stock.

I am, therefore, convinced that anyone buying these at double the price is either ignorant or an imbecile or a morons or an idiot or just plane crazy. Unless someone in high places is motivating and manipulating them to act like a bunch of reckless and mad fools, I see no sane reason for such action. I am also sure that once the table is turned and facts come up there is a natural fall in the price of this stock, these crazy investors will want to blame someone or anyone in authority for their folly.

Imtiyaz Husain

Gulshan, Dhaka.