Bangladesh stocks rebound after unrest

Bangladesh stocks rebound after unrest

January 11, 2011 - 6:54PM

AFP

Bangladesh's volatile Dhaka Stock Exchange rose 15 per cent in the first hour of trading on Tuesday, rebounding a day after a plunge triggered violent clashes between angry investors and police.

The benchmark Dhaka Stock Exchange general index (DGEN) gained 996 points, or 15.33 per cent, on opening. On Monday regulators halted trading after stocks fell a record 9.25 per cent in less than an hour.

"This is a government-led rebound driven by market-boosting measures from the Securities and Exchanges Commission and the central bank that have increased liquidity," Mahmud Osman, professor of finance at Dhaka University, told AFP.

"It is not good for the market and the question is how much of these gains will be retained," he said.

Many analysts say Monday's plunge was caused in part by the Bangladesh Bank raising the cash reserve requirement (CRR) last month by 50 basis points, tightening money supply in a bid to rein in inflation.

The Bangladesh Bank softened its stance late on Monday and urged state-owned banks and private banks to buy shares to offset the stocks crisis, bank spokesman M Asaduzzaman said.

The DGEN index rose 80 per cent in 2010 but has suffered a series of falls in the past three weeks, sparking angry protests from investors and occasional clashes with riot police.

Police with water cannon were stationed outside the stock exchange building in central Dhaka to prevent a repeat of Monday's unrest, when thousands of investors fought street battles with police.

Many new small-time investors blamed plunges on both Sunday and Monday on the government and regulators.

© 2011 AFP