Major steps to revive stock market

The national budget for the fiscal 2019-20 was passed at the Jatiya Sangsad on Sunday with a number of supportive steps for revival of the capital market amid major revisions in some proposals. Market experts, however, have opined that the pragmatic moves of the government will create a favourable environment that will facilitate the country’s capital market stand on a strong footing and become well-functioning. The government brought revisions to two major proposals in the proposed budget for encouraging the investors to make fresh investment for stocks, which experts said would ultimately help rebound the capital market.

The tax imposed on reserve and stock dividend of a company listed on the stock exchanges has been reduced to 10 percent from the proposed 15 percent while finalizing the budget. At the same time, the tax-free profit limit for an individual investor would remain at previous level of Tk 50,000, which was proposed to be Tk 25,000 in the budget proposal.

‘Considering the proposal of business and entrepreneurs, we have to consider the interests of small investors in the capital market,’ she added. Participating in the concluding discussion of the budget, Prime Minister Sheikh Hasina said, “I earlier proposed to impose tax on the stock dividend by 15 percent.” Representatives of business community opposed this, PM said adding, ‘Some of the business leaders said if the tax is imposed at this rate, then it will raise cost of business and the investors will be discouraged to inject funds in the market.’

In this backdrop, the premier in her speech at the parliament ahead of passage of the Finance Bill-2019-20 on Saturday proposed to set the tax on stock dividend to 10 percent reducing from the proposed 15 percent. The House unanimously accepted the proposal. Prime minister said the banks and financial institutions do not want to pay cash dividend as they opt for raising their paid up capital as per the requirement of the Bangladesh Bank. But the government wants to protect the interests of the general investors and so the measure for paying tax at 10 percent on retained income and reserved of a listed company has been taken to benefit them.

President of the DSE Broker's Association of Bangladesh (DBA) Shakil Rizvi believes that the proposal to impose a revised tax on retained earnings and bonus shares is positive and investment-friendly. He thanked Prime Minister Sheikh Hasina for taking market supportive steps, especially for the small investors.
DSE director Minhaz Mannan Emon, who first made the demand for revision of the tax proposal thanked the prime minister, the finance minister and the Bangladesh Securities and Exchange Commission (BSEC) for taking the issue in cognizance while finalizing the budget.

He expressed the hope that this move of the government would have a positive effect on the share market. However, an uneasy calm is prevailing in the market with a regular slum in share prices, creating panic among the investors over the several months. Over the last several months, share prices have been continuously falling, causing a gradual frustration among investors that marked an ominous signal to a bearish market. Market analysts expect, the capital market would rebound soon following the supportive initiatives taken by the government.