Market observers see the regulator's new directive as a move to cool down the investment sector that was on the bull-run, influenced by speculations about a verdict on a mutual fund case.
A restriction on margin loans for mutual funds, announced by the capital market regulator yesterday, held back an upward trend in the transaction of such funds on Dhaka Stock Exchange.
In a circular, the Securities and Exchange Commission (SEC) asked merchant banks, portfolio managers, brokers and dealers to immediately stop margin loans until further order.
Meanwhile, Aftab Automobiles shares have also been brought under the purview of this margin loan restriction.
Investments by borrowing in mutual funds have become too risky, the market watchdog thinks.
Being advised, the DSE reported margin loan suspension through its server at 10:58am, just before the day trade time. The SEC directive was posted on the web at 12.21pm.
The mutual fund price loss marked the beginning of trade. All but one such funds declined 4-17 percent at the closing hour.“The SEC move will lead to a short-term correction in the prices of mutual funds,” Arif Khan, deputy managing director of IDLC Finance, told The Daily Star.
The imminent court verdict on the pending case has fuelled speculations about dividend announcement, which resulted in a high value of mutual funds, he said.He, however, said, “A short-term price correction instead of a big or long-term correction would be healthy for the market.”
The High Court on Thursday said it would hand down the verdict on the mutual fund case on November 4.In August last year, the HC stayed the dividend declarations by all mutual fund managers until disposal of a writ petition filed with the HC challenging the SEC modifications of mutual fund rules.
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