Slipping a Bit Too Much

The Dhaka Stock Exchange continues to slide and slide and this worries me. The market was up and running with great momentum in 2007, but now it is almost coming to a standstill. Standstill may still be an euphemism.

I had predicted this scenario a little while earlier here. But I did not think it would be this bad. What's causing this exodus from the stock market?

Economic reality settling in
We knew the economy was in for a tough time because of the food crisis, arrests and political changes. But it usually takes some time for the economic effect to appear in everyday lives. We should brace ourselves for what we merely heard as rumors as the effects are now in action.

On the right is the DSE Index for the last 30 days. I couldn't find the graph for the last 6 months because it would be too horrific and R rated for the DSE to publish.

Grameenphone's sham IPO
I will discuss why it is a sham a little later (still writing it up). But people are really hoping that they will be getting miracles out of this scenario. GP submitting their proposal to the SEC got the whole market bullish for 1 day. But then it continued to slide. (Maybe because people already figured out it was a sham)

Bank Fixed Deposit Rates
Now bank deposit rates are just shy of 15%. That means without doing anything you are getting 15% on the spot for your money, without any risks or worries. This is creeping out to be a contender for stock investments. The FDR rates will continue to rise as banks are reluctant to give loans and while they still think they are in a liquidity crisis.

Fall of AB Bank Foundation
Documented here. It still turns out they provided a large amount of credit/loan for each stock investment. For some time they got away with it, but then they got fined because they loaned too much. AB Bank Foundation were also involved in getting a piece of the lucrative pie. It turns out that they could also manipulate the stock by mass scale buying and selling. Again, AB Bank may not be much of a bank, but their Foundation beating all foundations out there. So 2008 Foundation of the year goes to AB Bank. A foundation that wasn't a drain to AB Bank, but actually managed to give something in return to AB Bank.

Picture on the right is a little funny. It is the signing ceremony where AB Bank would handle the securities of Trust Bank. Read the sign board in the background ; )

US Economic worries
The largest economic entity is in trouble and you think Bangladesh will be spared? Due to the wonders of globalization, when someone goes down the entire world is in the dumps.

The AB Bank Foundation scam

Most people create foundations to do beneficial things. Foundations are meant to do CSR and donate. But the AB Bank Foundation is a completely different story. From what is going around the AB Bank Foundation has been involved in:

• Merchant Banking
• Supporting the parent company, AB Bank
  
• Holding as much as 18% of IFIC Bank (later reduced to ~7%) on behalf of other parties

This all may have been excusable if we had seen the money from these activities trickle down into hefty donations. But no, not a single taka was donated. So we wonder whom this foundation was created to benefit? Did we ever hear any CSR from AB Bank. We hoped of things to come when we heard about a 'foundation' only to discover

They have been penalized when Bangladesh Bank took the foundation's 7% stake (worth Tk 100 crore) from them. And asked them to seize all merchant banking activities of the foundation. Then when AB Bank Foundation ceased all their activity, it sent the Dhaka Stock Exchange crashing.

Some facts about AB Bank

• Not really a bank (anymore)
  
• More money comes from merchant banking than actual banking
• Uses highly unethical merchant banking practices
• Previously fined Taka 10 crore for violating merchant banking rules
• Needed logo change to wipe out 25 years of dismal performance
• Needed name change, now instead of being called Arab-Bangla Bank, its simply 'AB' Bank