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Bangladesh : Tightening Credit Flow Pushes Bangladesh Stocks Record Fall.

Bangladesh stocks nose-dived on Sunday with the Dhaka Stock Exchange (DSE) suffering the highest single-day fall since the 1996 crash because of the regulators' market-cooling tightening of credit flow.

The benchmark DSE General Index (DGEN) shed 204.75 points --- its highest single-day drop since November 6, 1996, when the index had lost 233 points --- to close at 6200, which is 3.19 percent down from the previous working day.

On the other hand, the benchmark index of Chittagong Stock Exchange -- CSE Selective Categories Index -- also plummeted by 366.47 points, or 2.98 percent, to 11,903.84.

The unusual fall began as brokerage houses started trimming their respective portfolios in line with the directives issued separately by the central bank of Bangladesh and the Securities and Exchange Commission (SEC) limiting their exposure to stock market.

The markets fell sharply as it reacted negatively to the regulator's measures, market operators said, adding that small investors suffered most because of the slump.

Bangladesh Bank (BB), the country s central bank, has sent show-cause notices to the seven commercial banks for not to complying with its directive to bring their overexposure to the market within the permissible limit.

Early this month the central bank of Bangladesh instructed all 47 scheduled banks not to have more than 10 percent of their liabilities in the stock market and adjust overexposure by next month.

Last week, the SEC put cap on the single-borrower exposure of the merchant banks and the brokerage houses to bring about discipline in the stock market.

The exposure limit has been set at BDT 100 million ($1.44 million) in the case of merchant banks and $0.72 million (BDT 50 million) for brokerage houses. The decision on exposure limit came into effect from Sunday.

In the DES, the country s premier bourses, total turnover was BDT 14.5 billion (US$ 210.1 million) on Sunday, which was 14 percent lower than last week s daily average turnover of BDT 17.0 billion (US$ 246.5 million).

The premier bourse's four major sectors -- banking, non-bank financial institutions, fuel and power, and engineering -- contributed heavily to the dip in the market.

All sectors, except mutual funds, closed lower, as selling pressure dominated the board.

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Date:Jul 26, 2010
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