175 listed companies and 16 closed-end mutual funds have been found eligible for receiving investments from the fund
Less than two-thirds of listed companies and funds have been found eligible for receiving investments from the special fund outlined by the Bangladesh Bank.
An analysis of Dhaka Stock Exchange's data by a top brokerage firm reveals only 175 among 321 listed companies, and 16 among 37 listed mutual funds, fulfil all criteria for investment set by the central bank.
The Bangladesh Bank on Monday issued a circular offering a liquidity support for the struggling capital market.
It said, each of the five dozen scheduled banks can build a Tk200-crore fund with either their own resources or money borrowed from the central bank.
The total fund must be invested into capital market securities through banks' own portfolios, or other capital market intermediaries who will borrow from the banks.
The central bank outlined the way in which securities will get the investments based on some common criteria.
Of those, listed companies must have been paying at least 10 percent dividends annually over the last three years, no matter what the form of dividends were – cash, stock or a combination of both.
Besides, the central bank has set a condition that the free float shares of the eligible companies must not exceed 70 percent of their total shares. This means sponsors and directors of the companies must hold at least 30 percent shares of their listed companies.
Of the 30 listed banks, AB Bank, The City Bank, ICB Islamic Bank, Southeast Bank and Uttara Bank are off the eligibility list.
Among the 23 non-banking financial institutions, 12 made it to the list. These are BD Finance, DBH, GSP, ICB, IDLC, IPDC, Islamic Finance, LankaBangla, National Housing, Phoenix Finance, United Finance and Uttara Finance Ltd.
Of the 47 life and non-life insurers, 34 are eligible for investments from the special fund. Among the 56 listed textile sector companies, 23 are on the list.
Some of the renowned firms that did not make it into the list include Heidelberg Cement, Lafarge Holcim, RSRM, Olympic Industries, Beximco Pharmaceuticals and Beximco Ltd, and Apex Footwear.
Ten percent of the total money from the special fund must be invested into mutual funds – listed or non-listed open-end ones.
To be eligible, the mutual funds must have a track record of paying at least 5 percent cash dividend annually over the last three years, said the Bangladesh Bank.
For open-end mutual funds, the additional condition is that their net asset value must be above the face value of fund units.
As the mutual funds that are going to be formed after publishing of the circular cannot fulfil the dividend record criteria, they have to invest 70 percent of their money into listed shares and the rest of the assets into listed fixed income securities like corporate bonds, debentures and treasury bills and bonds.
The research team at the brokerage firm has found a total of 16 closed-end funds managed by six different asset management companies eligible for investment from the special fund.