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Confidence building crucial for boosting share market

Published : 08 May 2019 09:12 PM | Updated : 06 Sep 2020 05:54 AM

Amid continuous depreciation of stocks the government has undertaken massive measures to boost the country’s capital market, which faced crushing blows thrice in the period between 1996 and 2010 due to some unscrupulous traders and stakeholders. However, market analysts 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 process. Market analysts and general investors therefore called for immediate steps to remove the identified market manipulators from important positions in the policymaking level.

On the other hand, the government’s new policy has enabled bad borrowers to obtain many financial benefits, including easy rescheduling of defaulted loans. This will also put adverse impacts in the market as the good borrowers are deprived of the benefit, experts claimed.However, it is learnt, the government has planned taking up new measures in favour of the good borrowers.

If steps are not taken right away, the capital market might see another disaster in the near future, they expressed fear. Seeking anonymity, an economist told Bangladesh Post: “Most of the old investors returned to the share market to inject their investments on sector-wise securities expecting good return but they faced the same problem again after making investment.”

“Hence, the government should take special care of the market to restore investors’ confidence. Otherwise, they will never have trust in the market,” he added. The government must ensure transparency, efficiency and accountability to the investors from the regulator, he said. Talking to Bangladesh Post many affected investors said they have continued protesting against relentless fall in the market especially for questionable IPO (initial public offering) approval.
They urged the government to remove Bangladesh Securities and Exchange Commission chairman M Khairul Hossain immediately for his failure in reviving the market after the 2010-11 disaster.

Director of Dhaka Stock Exchange (DSE) Minhaz Mannan Emon said, “Entry of weak companies into the capital market is making investors, especially the small ones, face a miserable condition.” A section of auditors in different financial institutions, especially the chartered firms, usually recommends companies that do not fulfill minimum criteria to run any business, through resorting to underhand dealings, he added.

After being enlisted with the capital market these companies cannot perform well. Even share prices of many companies fall below the face value, making investors lose confidence in the market, he said. Financial Reporting Council (FRC) Chairman C Q K Mustaq Ahmed said awareness can play a crucial role in eliminating the irregularities.

Unfortunately, no one wants to understand financial accounts, he said adding that this is very important for making investment in the stock market.

He mentioned that investment in capital market is risky. Hence, investors should gather knowledge before investing in the market, which will help them get benefited.

A capital market investor Abdul Mannan told this correspondent, “Right now, we cannot understand the latest market status. We are absolutely in the dark. Even the broker houses do not have any clear concept about the current trend of the capital market.” “If such a situation maintains its current course, a bleak future, or a disaster to a greater degree, is a must for the market. We are seeking government’s intervention to revive the capital market.”

Recently, the country’s market has witnessed a downward trend that has been continuing Since January 24, 2019, leading to a loss of confidence among investors to inject new funds into the market. Eminent economist and market expert Prof Abu Ahmed told Bangladesh Post the share market is witnessing a continuous fall as most of the companies, particularly banks, have failed to satisfy the investors with their earnings and dividends.

Most of the companies are offering stock dividends, and as a result share supply is increasing but the number of investors is not rising in proportion to that, he further said. Amid fear of fund shortage most of the investors are selling their shares to flee the market, he added. “The government should immediately prepare the ground quite well in order to undertake a drive to develop a long-term financing in the capital market”, Ahmed said.

In absence of quality securities the capital market is still unable to play its due role in expanding economic activities, which is one of the strategic tools to achieve SDGs, he said. Therefore, harnessing benefit from the stock market is still a far cry, he added. The eminent economist said the government should encourage good companies, including local as well as multinational ones, to offer IPOs. 

Ahmed said the government must include some effective initiatives in the upcoming budget in favour of the capital market, especially tax exemption for the listed companies. He suggested investors to take a cautious mood and learn properly about the stocks before investing.