Increased investor participation pulls up SME index by 40% in three days

The Small Capital Platform Index- DSMEX- of the Dhaka Stock Exchange (DSE) jumped 40% in the last three working days as investors' participation increased due to a waiver from the registration requirement for trading on that platform.

On 28 March, the DSE board removed the registration requirement for becoming a qualified investor to increase participation in its SME platform.

According to the decision, the DSE will automatically register an investor if they have an investment of Tk20 lakh in their portfolios.

Riding on this move, the DSMEX rose 329 points to close at 1,135 in the last three days till Thursday. At the same time, transactions increased by 28 times.

At the end of the Thursday trading session, the turnover stood at Tk12.57 crore, which was Tk0.44 crore on 29 March.

Currently, nine companies are being traded on the SME board, and the share price of all these companies increased since 29 March.

The market regulator had earlier taken steps to increase investor participation in the SME platform, but they were not very fruitful. One of the hurdles was the registration process, said a senior official at a brokerage firm.

Although the sector is new, there is a lack of publicity in the stock market, starting from the Bangladesh Securities and Exchange Commission (BSEC), he added.

Due to this, the official said, most of the investors did not show any interest in the SME board although the companies are obliged to pay cash dividends of at least 10% for the next three years.

Earlier on 17 February, BSEC reduced the investment in the stock market from Tk50 lakh to Tk20 lakh to become a qualified investor in a bid to increase participation in the SME market.

In 2016, the market regulator decided to create a separate market called "Small Capital Platform" on both bourses of the country for small-cap companies seeking to be listed on stock exchanges.

Because of this, the Bangladesh Securities and Exchange Commission (Qualified Investor Offer by Small Cap Companies) Rules-2016 for low cap companies was formulated. However, in 2018, it was decided to amend some of its rules.

Then in April 2019, the DSE launched the Small Cap Market (SME) platform. Finance Minister AHM Mustafa Kamal was the chief guest at the inaugural function. Two and a half years after the launch of the SME platform, SMEs started trading on the stock market in September last year.

DSE's SME platform initially started trading with six companies.