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‘Good companies in bourses needed’

Published : 12 Nov 2020 09:40 PM | Updated : 13 Nov 2020 01:39 AM

As the capital market strengthens the country’s economy, it is time to encourage good companies for long-term financing, paving the way for the revival of stocks, experts 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 achieving SDGs, they added.

However, the stock market is now witnessing steady growth after recovering from shocks in 2010 when share prices fluctuated wildly, scaring away investors.

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. 

Market analysts said, the government’s good initiatives will not be successful unless the key players, responsible for the devastations of the stock market, are removed from the process.  

Demutualization of two stock exchanges in the country was done in 2013 by separating management from ownership in order to develop the capital market and establish effective institutional good governance.

Demutualisation means that the ownership of stock exchanges separates from the management.

However, the Dhaka Stock Exchange (DSE), the largest capital market in the country, is still far behind the implementation of actual demutualization. 

In the 2009-2010 fiscal, the market cap witnessed a sharp rise to $39 billion from $18 billion in the 2008-2009 fiscal.

But the growth of market cap (Capitalisation) could not maintain pace with the country’s economic development. 

The market cap stood at $46.50 billion in the 2017-18 fiscal, according to DSE data. On Thursday, this figure was $46.98 billion.

Eminent economist and market expert Prof Abu Ahmed told Bangladesh Post, “For lack of good financial-base companies, especially multinational and state-owned companies, the capital market cannot build an investment-friendly environment for local and foreign investors to inject newer funds into it.”

The capital market now is traded almost 80 percent by unscrupulous traders while only 20 by general investors, he said adding, the government must include good companies to stop gambling.

“The government should immediately prepare the ground quite well to bring in some good companies, in order to undertake a drive to develop a long-term financing capital market,” Ahmed mentioned.

A capital market investor Abdul Mannan told this correspondent, “Right now, we cannot understand the latest market status. We are absolutely in the dark.”

The share price of most of the bad financial base companies has increased due to unscrupulous traders being active in the market, he said adding, “We are seeking government intervention to revive the capital market by stopping unusual trade in the market.”

Professor Shibli Rubayat Ul Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), said on Wednesday at a programme, “His commission is giving higher priority on establishing good governance and automation in the share market.”

If automation is ensured in the market, it will help ease business, he said adding, it will also save time and cost of the stakeholders.

He expects, “The capital market will be built a dynamic market within two years by ensuring good governance and transparency in the market.”

Rubaiyat said the fundamentals of many securities that came in the market over the last couple of years are not good.

On the other hand, many companies have passed their IPOs through submitting fake papers at the BSEC, he added.

The perpetrators of such incidents are being identified and thus being brought to book so that none could dare to commit such crime anymore, he mentioned.

However, DSEX, the prime index of the Dhaka Stock Exchange, increased by 21.33 points or 0.43 percent to settle at 4,905, after losing 45 points in the past two straight sessions. 

The market capitalisation of DSE also witnessed a rising trend to stand at Tk 3,984 billion on Thursday, from Tk 3,969 billion in the previous session.

On the other hand, the Chattogram Stock Exchange also ended higher with its All Shares Price Index (CASPI), up 60 points to close at 14,067.