DSE to open window for laggard shares

Dhaka Stock Exchange (DSE) is expected to open a separate window for share trading of non-performing companies under Z category or low quality ones in a bid to discourage investors to bet on these issues, according to a DSE decision taken yesterday.

The DSE said trading of the shares of non-performing companies under Z category will take place at 'Over The Counter' (OTC) market, meaning that price movement of these shares will not be seen on the electronic board.

“The non-performing companies will be segregated from the main board. It's a message to the investors that 'don't go for these shares',” said DSE Director Md Rakibur Rahman.

The board formed a 10-member committee, headed by Rahman, to examine legal aspects and devise modalities for separating the non-performing companies under Z category.

The committee is expected to submit its recommendations within three weeks.

Companies that do not offer dividend and hold annual general meeting regularly and are out of operations fall under Z category.

The DSE moved to open an alternative trading platform based on a decision taken at a meeting with the market regulator last week to keep investors away from investing in Z category shares.

Out of more than 90 companies now listed under Z category, traces of many are not found, while some have gone out of operations. But trading of the shares of these companies is taking place as many retail investors are unaware of the present status of these companies.

According to the last week meeting decision, shares of the companies which are out of operations and whose net asset values are negative will be traded at OTC market.

The DSE initiative to open an OTC market comes as share prices of a number non-performing companies under Z category witnessed surge recently.

Officials said some 28 companies have been identified as non-performing ones but the list of the companies will be finalised after further investigation.

“We want to assure investors that no one will be able to cheat them,” Rahman said, adding that if the price movements of these issues are not seen on the electronic board, it will be difficult to manipulate prices.

Under the OTC system, DSE will open a separate counter where interested buyers and sellers of the shares of non-performing companies will announce prices and amounts of shares.

Transaction will take place if the announced prices of buyers and sellers match.

“It will have a positive impact on the market as investors' risk will minimise,” said Rahman.

Yawer Sayeed, chief executive of AIMS of Bangladesh, an asset management company, hailed the move and said it would bring transparency in the market.

“Investors will not be cheated,” he added.