Stock prices of Small Capital Platform are soaring in recent times amid an influx of investors despite the main trading board is incurring losses.
Market insiders said participation of investors is rising on the SME board as the stock market regulator relaxed some conditions for trading shares on the SME Platform.
"As the number of shares of the SME companies is low, investors speculate that the stock price will rise further and so they are buying the shares," said a leading broker.
Share trading on the DSE SME Platform started on September 30 last year, creating an opportunity for small and medium enterprises (SMEs) to raise capital from the stock market, having a paid-up capital between Tk 30 million and Tk 50 million.
Initially, the securities regulator did not allow general investors to trade on the SME board without prior permission considering the 'risk'. The minimum investment requirement was Tk 50 million to trade on the SME Board.
But due to the absence of general investors, the stock prices of the SME companies had remained low, and most of the shares were in the hands of institutional investors.
This prompted the securities regulator, in February this year, to relax the requirement, saying if an investor has an investment of Tk 2.0 million, they can make trading on the SME board.
Besides, the Bangladesh Securities and Exchange Commission (BSEC) in March also relaxed the rules for mandatory registration requirement to attract more investors to the SME board.
The SME index has started to soar after the securities regulator brought the new rule into effect. However, the main index of the DSE remains low.
Between April 3 and June 23 this year, the Small Capital Platform Index - DSMEX - jumped 761 points or 67 per cent to settle at 1,896 Thursday.
On the other hand, DSEX, the core index of Dhaka Stock Exchange, plunged 445 points or 6.57 per cent during the period under review.
Currently, 12 companies are being traded on the DSE SME board and prices of all companies rose between 22 per cent and 209 per cent within a month, according to data from the prime bourse.
Stocks of Apex Weaving & Finishing Mills soared 209 per cent, Star Adhesives surged 129 per cent, BD Paints jumped 92 per cent, Krishibid Seed 82 per cent, Wonderland Toys 73 per cent, Nialco Alloys 59 per cent, Oryza Agro Industries 47 per cent, Master Feed Agrotec 41 per cent, Bengal Biscuits 40 per cent, Mostafa Metal Industries 38 per cent, Mamun Agro Products 33 per cent and Krishibid Feed 22 per cent.
The participation of the general investors has increased after the BSEC removed complexities over entry to the market, said a merchant banker.
As the number of shares of the SME companies is low, the share prices of these companies rose fast, he said, urging the investors to be careful about their investment.
"If investors are not careful when buying stocks, it will be harmful to them as well as for the market," he said.
Initially, the SME stocks were allowed to rise or fall by 20 per cent in a single day. Amid the continuous rise, the stock market regulator brought down the circuit breaker to 10 per cent from April 7, 2022.
