The government is going to take a set of measures including enhancing the participation of banking and non-banking institutions in the capital market to revive the capital market. Prime Minister (PM) Sheikh Hasina has given six-point directives for rebounding the stock market by bring back investors’ confidence.
Prime Minister gave these directives while attending a meeting with Khairul Hossain, the chairman of Bangladesh Securities and Exchange Commission, and government policymakers at its office in the city on Thursday afternoon, said a press release. They discussed to taking many measures including short- and long-term to build strong capital market, the statement said.
The six-point directives include, ensuring easy credit facility for market operators, attracting more foreign investment, listing more multinational companies, profitable state-owned enterprises (SoEs), enhancing institutional investment in the market, enhancing participation of banks and financial institutions in the stock market, and boosting investment capacity of the state-owned Investment Corporation of Bangladesh (ICB).
Earlier on Wednesday, lawmakers discussed the DSE main index's free fall in Parliament and sought the Prime Minister's intervention. Finance Minister AHM Mustafa Kamal has recently said, “The government is going to take tougher actions against the capital market manipulators and rumour mongers as it is passing through a critical time for ongoing bearish trend.”
“Various government agencies will take action against those who are spreading the rumours in the market,” he said adding that, the regulator, BSEC, has been instructed in this regard.
On the other hand, the 11-point recommendations recently placed to the government by DSE’s board of directors include long-term financing arrangements from capital markets, increasing the supply of money in the market, bringing shares of the state-owned company to the market, activation of T-Bond transactions as soon as possible.
The recommendatrions also include, encouraging multinational companies to be listed in the capital market, quick settlement of Grameenphone and BTRC conflicts, reduction in tax on DSE and capital market transactions, ensuring transparency of audit reports, increasing the ability of ICBs and other companies to develop capital markets under public-private partnership and formation of a high powered coordination committee to prop up the capital market.
Although the government, Bangladesh Bank and regulator have taken several initiatives to stabilize the share market, it has not been possible as yet for lack of coordination, resulting in the present quagmire. Market analysts said government’s several steps also failed to rebuild investors’ confidence in the market as it is not visible yet.
They said the share market has faced critical moment for several months as investors had been suffering a lack of confidence for long. Besides, the country’s stocks showed a steady downward trend as investors were worried about the continuous fall of most of the securities. On the other hand, poor macroeconomic indicators, dearth of quality stocks and liquidity crunch worsened the ongoing confidence crisis among investors, they mentioned.
They said the share market has been going through bad patches due to a drop in foreign investment, fear of instability of the market coupled with thin participation of institutional investors.
Even the shares price of some giant companies including Square Pharmaceuticals, Grameenphone, British American Tobacco and Renata company are very low in the history of the capital market, but individuals, institutional and foreign investors have been selling the stock instead of buying shares, they added.
They believed that, “The government’s initiatives will certainly bring back investors’ confidence back in the market, helping to build strong market.” Eminent economist and market expert Prof Abu Ahmed told Bangladesh Post, “The government should immediately prepare the ground quite well, in order to undertake a drive to develop a long-term financing capital market.”
However, the stock market has been witnessing a downward trend in the last two years. As a result, the investors are gradually losing confidence to inject new funds into the market. However, the Dhaka Stock Exchange (DSE) closed the week with the highest single week fall in prime index since 2013 following investors' panic sales executed in all sessions amid lack of confidence.
The prime index also hit the 44-month low as majority number of listed securities witnessed price corrections throughout the week on the DSE. The core index of the Dhaka Stock Exchange (DSE) went down by more than 2079 points, or 32 percent, to settle at 4,149 points on Thursday from 6,228.65 points in 19 December, 2017.
Meanwhile, the blue chips index (DS30) slumped by 1406 points or 37.34 percent to close at 1406 points on Thursday from 2,243.87 points on December 19, 2017 and the DSE Shariah Index lost 428.49 points or 30.97 percent to close at 940 during the time. The market capitalisation of DSE dropped to Tk 3,193 billion on Thursday, which was about 23 percent lower against Tk 4,204 billion on December 19, 2017.
On the other hand, the port city bourse, the Chittagong Stock Exchange (CSE) has also seen a negative trend since May 1, 2018 with its selective category index (CSCX) losing nearly 3000 points to close at 7634.76 points on Thursday. The CSE All Share Price Index (CASPI) also fell about 4860 points to settle at 12,600 during the time.