Bangladesh's stock frenzy raises fear of new crash

Everyone in this unofficial trading room, one of hundreds across the country, is glued to a screen showing share price movements on the Dhaka Stock Exchange — up nearly 30 percent since January.

“My friends make hefty profits investing in stocks and told me I could make 20,000 per month by investing 200,000 taka (US$3,000),” said Rahman, a 30-year-old electrician who returned from working in Singapore last week.

“Some people have said the market could crash any time, but I've been hearing about this for years. In reality, it's going up and up,” he said.

Rahman is one of 143,000 people who opened electronic share accounts country-wide in the first two weeks of February. The figure has officials predicting this month will break the previous record, set in October 2007, of 191,000 new accounts.

But like the majority of Bangladesh's new part-time traders, Rahman has no idea what the bourse's largest listing or best performers are, what the quarterly or annual profits of key firms are, or whether a stock is overpriced.

Officials say such blind enthusiasm by retail investors has fuelled a dangerous up-trend at Bangladesh's main bourse — the general index hit a record high of 5828.38 points this week, up 28.5 percent since the start of the year.

This year record-breaking highs have become a daily occurrence on the Dhaka Stock Exchange as investors overlook a series of curbs and warnings by regulators, who are concerned a crash could wipe out savings.

“The market is dangerously overheated with the daily infusions of liquidity by new retail investors who have barely any idea about the fundamentals of the market,” the Securities and Exchange Commission (SEC) executive director, Anwarul Kabir Bhuiyan told AFP.

“We could see a massive correction anytime.”

He said the SEC had restricted borrowing to fund trading of shares in scores of companies, placed many stocks on watch and dished out repeated warnings.

“What can we do if people don't heed our warnings? We've even received threatening phone calls telling us not to act against this Bull Run,” Bhuiyan said.

In November 1996, wild speculation and lax regulations sent Dhaka stocks soaring to 3,600 points before a crash took them to 700 points, wiping out thousands of families' savings and slowing economic growth the following year.

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