December 20, 2010 / 1:56 PM / 9 years ago

Bangladesh markets rebound from deepest slump

* Stocks rebound after regulator, cen. bank relax measures

* Money market stable in a few days -central bank governor

* Grameenphone, Marico surge on return to normal trading

By Ruma Paul

DHAKA, Dec 20 (Reuters) - Bangladesh’s bourses recovered on Monday from a record fall the previous day which had prompted angry investors to protest in the streets.

Shares on the benchmark Dhaka Stock Exchange .DSI General Index gained 304.87 points, or 3.98 percent, as the regulator and central bank reversed measures they had taken this month to cool markets that had overheated in recent weeks.

Hundreds of disgruntled investors went on the rampage outside the Dhaka Stock Exchange on Sunday after the index shed 6.7 percent. [ID:nSGE6BI01D]

The central bank had raised banks’ cash requirement ratio from 5.5 percent to 6 percent, effective Wednesday, Dec. 15, to rein in inflation. The measure was also intended to curb runaway credit flow, especially to the volatile capital market.

Call money market rates also hit a record high on Sunday. The rate at which banks lend to each other climbed as much as 180 percent, dropping to between 45 and 55 percent on Monday.

Markets had been closed between last Thursday and Saturday.

Some banks invested 75 percent of their deposit in the stock market against a ceiling of 10 percent and had been told to get back under the limit by Dec. 30. This has now been extended to Jan. 15.

“The money market will be stable within a few days,” central bank governor Atiur Rahman said. “The central bank is injecting more money to the banking system than it absorbs via the cash reserves ratio (CRR).”

He said 20.76 billion taka ($346.4 million) was drained from the system due to the increase in the CRR while the central bank provided 60.55 billion taka on Dec. 15.

Measures imposed by the stock exchange regulator such as providing share credit on a net asset value (NAV) basis were removed, and the margin loan ratio was increased.

A leading economist and former finance adviser to the government, Mirza Azizul Islam, said: “They (regulators) should put in place well-thought measures, to help investors and boost markets, that they would be able to sustain even if the bourses were jittery in the short run.”

Shares of telco Grameenphone GRAE.DH — majority owned by Norway’s Telenor (TEL.OL) — gained 17.5 percent and India-based consumer and beauty products maker Marico (MRCO.BO) MARI.DH closed 11.9 percent higher on Monday, as both were allowed to trade normally again.

They had been placed in a restrictive spot market several months ago to cool their red-hot winning streaks.

($1=59.92 Taka)

Additional reporting by Serajul Islam Quadir; Editing by Anis Ahmed and David Hulmes

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