Sarwar A Chowdhury
Al-Arafah Islami Bank pulls into focus, as the bank starts trading today with changed share face value.
Investors will scan data on banking shares and the impact of Al-Arafah on the sector, market analysts said. At least three other banks are waiting in line to trade with changed face value.
The trade of Aftab Automobiles with a changed face value set a positive tone for market last week. And the investors, inspired by good news, moved to scope out the next.
Aftab Automobiles was the first listed company that traded with a new face value of Tk 10, denominated down from Tk 100. On May 24, the first day of its trade after conversion, Aftab Automobiles rose as high as 7 percent.
By definition, a change in share face value does not alter the fundamentals of a company. But it has a psychological effect, which spurred Aftab Automobiles last week.
Thanks to denomination, the value of a market lot comes down significantly and investors can easily buy shares, meaning demand is on the rise.
A market lot means the minimum number of shares of a company that can be bought or sold on a bourse.
In the case of Al-Arafah Bank, every 50 shares (market lot for the bank) traded at Tk 974 on May 25, the last trading day for the bank with a previous face value of Tk 100. It means the value of a market lot was Tk 48,700.
After conversion to Tk 10 in face value, the price of Al-Arafah Bank shares has been set at Tk 97.4 and the market lot at 250 shares, meaning an investor will have to pay Tk 24,350 for a market lot. It shows a reduction by half in the value for each lot.
The reduction in the value of the market lot indicates easy access for retail investors to shares. It fuels demand and, ultimately, the price.
Md Shawkat Ullah, an investor, said he bought shares of some companies that announced their decisions to change face value from Tk 100 to Tk 10.
"Even with the change in share face value, the fundamentals of a company will remain the same," said Salahuddin Ahmed Khan, professor of finance at Dhaka University.
Investors will have an easy access to shares, as the market lot gets smaller, which means they will have to invest less than before in the market lot.
The Securities and Exchange Commission is trying to make investors aware that the face value change has nothing to do with a company's fundamentals.
“From the theoretical point of view, any remarkable change in the market price of shares for such change is also not logical. Therefore, investors should take their investment decisions based on a proper judgment," the SEC says in a web posting.
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