Govt measure goes in vain

Plot to destroy capital market


Government’s massive measures to bring back investors’ trust in the capital market are going in vain as a deep rooted plot is still being hatched in many ways to destroy stocks. They mentioned the market faced crushing blows twice in the period between 1996 and 2010 due to manipulation of some unscrupulous traders and stakeholders.

They said, the government’s good initiatives will not be successful unless the key players, who were responsible for the devastations of the stock market, are removed from the way.   If steps are not taken right away, the capital market might see another disaster in the near future, they expressed fear.

Senior officials of Bangladesh Securities and Exchange Commission (BSEC) said some individuals have created this unstable situation of the market in a planned way. They are trying to demolish the market for their own interest, they added.

Although listed banks have opportunity to invest in the capital market for getting benefits from the government, unscrupulous people have prevented the listed banks to invest in the market, they said. On the other hand, some dishonest people also rendered inactive the Investment Corporation of Bangladesh (ICB) for providing funds support to the market, they said adding that, they are investing at different places instead of investing money in the capital market.

Shareholders did not invest their funds in the market to get from Chinese consortium by selling 25 percent shares after getting tax benefit from it, they said. 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, 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 stabilise 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 good companies including Square Pharma, 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.

Talking to Bangladesh Post, many investors said, the share market usually remains less active some time. But this time, the investors think it is a bit unusual. Hence, the government should quickly take proper initiatives to revive the stocks market for investors.

Eminent economist and market expert Prof Abu Ahmed told Bangladesh Post, “The share market witnessed a continuous fall as most of the companies, particularly banks, have failed to satisfy the investors with their earnings and dividends.

He said Grameenphone’s move of taking delivery of huge volumes of network apparatus without BTRC's approval has run into a grey area on the legal front, fueling the negative sentiment of the investors on the stock in an already declining market.

As a result, most of the investors including foreigners are selling their shares to get out of the market, he said. The government should immediately prepare the ground quite well, in order to undertake a drive to develop a long-term financing capital market”, Ahmed said. The economist further said, the government should encourage good companies, including local as well as multinational companies like Unilever, Nestle and Robi, to offer IPOs.

Ahmed mentioned that the government should make some rules and give incentives including reducing corporate tax for listed companies to encourage good companies to be listed in the stock market. The government should give cash supports to the market like easy lending from banks, for listing organisations and direct fund support in the market through ICB or Brokerage houses to help rebound the market, he added.

Former Advisor to a Caretaker Government AB Mirza Azizul Islam said, the government should encourage existing companies to list in the market by giving many fiscal initiatives which will rebuild investors' confidence to inject more funds into the market.

At first, the government should bring some public companies to motivate other companies to enlist in the 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 2031 points, or 32 percent, to settle at 4,197 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 424.49 points or 30.97 percent to close at 945 during the time. The market capitalisation of DSE dropped to Tk 3,236 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 2384 points to close at 8266.57 points on Thursday.

The CSE All Share Price Index (CASPI) also fell 3960 points to settle at 13,531 during the time.