The Bangladesh Securities and Exchange Commission (BSEC) has relaxed its 2015 order that restricted margin loans for buying shares that change their category in the bourses.
According to the current rule, any stock that changes its category will remain non-marginable for the first 30 days of trading.
As per the new rule, the shares which improve their category from 'Z' to 'A' or 'B' will remain non-marginable only for their first seven days of trading.
On the other hand, the stocks that will change their category from 'A' to 'B' or vice versa, will become marginable from the next trading day following the category change if they comply with other conditions including a maximum price to earnings ratio of 40.
However, the 'Z' category stocks will remain non-marginable as before.
The two bourses in Bangladesh have their unique ways of categorising listed companies based on their dividends, operational status, and the regularity in holding annual general meetings.
Companies that pay at least 10% dividends including bonus shares, maintain timely disbursement of dividends, and are in operation are listed under the 'A' category.
A regular company paying less than 10% dividends belongs to the 'B' category.
And the companies that pay no dividend, and remain out of operations for more than six months, except because of factory overhauling, are listed under the 'Z' category in the bourses.
The BSEC is trying to relax its rules regarding margin loans, which investors take as leverage in buying stocks for more return since the rising stock market began to falter at the end of September this year.
Earlier, the regulator announced that investors cannot take margin loans for more than 50% of their equity as soon as the Dhaka bourse's broad index DSEX goes above the 8,000 mark. Amid the market downturn in recent months, it repealed the index-linked margin loan control mechanism and made the debt to equity ratio for portfolio investors to 80% in any market condition.