Riots in Bangladesh as stock bubble bursts



The Dhaka Stock Exchange was an unlikely bubble but its bursting is proving typically ugly.

Hundreds of investors rioted in the streets outside the Bangladeshi exchange yesterday after trading was halted when prices plunged almost 9 per cent, the bourse's biggest drop in its 55-year history.

The crowd clashed with police, lit piles of tyres and furniture and chanted slogans against the government. Television reports showed several protesters bleeding badly from blows after police said they were forced to use batons.

In Bangladesh, where the GNI per capita in 2009 was US$580 (Dh2,130), according to the World Bank, the stock exchange became a source of relative wealth in the past year as it climbed more than 80 per cent in the first 11 months compared with the same period a year before.

This success was enjoyed not only by fund managers and other professionals but by millions of "mom-and-pop" investors who poured money into the exchange. The number of investors in the market doubled to 3.3 million.

The first signs of trouble emerged last month, when the government raised interest rates on concerns that shares were overvalued. Stock prices immediately began falling.

There were protests after some of the earlier dips but the downwards trend has accelerated recently. The main index on the exchange has fallen more than 27 per cent in the past three weeks.

"We always knew any fall would be nasty - now things are getting nasty," Reaz Islam, the head of LR Global Fundin New York, told AFP. "More than 70 per cent of investors are small investors. Most invest without looking at the fundamentals of the market and these people are very emotional - they are very hurt by this."

Many investors said they were at risk of losing their life savings.

"I lost 5 million taka [Dh258,215] out of a 10m taka investment. This is insane,"said Monirul Islam, a small investor.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Expected completion: 2022

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Ground floor banquet hall: 370 square metres to accommodate about 750 people

Ground floor multipurpose hall: 92 square metres for up to 200 people

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A foster couple or family must:

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Non-profit arts studio Tashkeel launched this annual initiative with the intention of supporting budding designers in the UAE. This year, three talents were chosen from hundreds of applicants to be a part of the sixth creative development programme. These are architect Abdulla Al Mulla, interior designer Lana El Samman and graphic designer Yara Habib.

The trio have been guided by experts from the industry over the course of nine months, as they developed their own products that merge their unique styles with traditional elements of Emirati design. This includes laboratory sessions, experimental and collaborative practice, investigation of new business models and evaluation.

It is led by British contemporary design project specialist Helen Voce and mentor Kevin Badni, and offers participants access to experts from across the world, including the likes of UK designer Gareth Neal and multidisciplinary designer and entrepreneur, Sheikh Salem Al Qassimi.

The final pieces are being revealed in a worldwide limited-edition release on the first day of Downtown Designs at Dubai Design Week 2019. Tashkeel will be at stand E31 at the exhibition.

Lisa Ball-Lechgar, deputy director of Tashkeel, said: “The diversity and calibre of the applicants this year … is reflective of the dynamic change that the UAE art and design industry is witnessing, with young creators resolute in making their bold design ideas a reality.”

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