• Monday, Oct 21, 2019
  • Last Update : 09:04 am

Moves to fix falling stocks falter

  • Published at 01:06 am September 19th, 2019
web-DSE-File photo of Dhaka Stock Exchange Limited
File photo of Dhaka Stock Exchange Limited Mehedi Hasan/Dhaka Tribune

The prime bourse Dhaka Stock Exchange (DSE) broad index DSEX continued to bleed and settled at a 33-month low on Wednesday

A string of policy interventions and regulatory measures aimed at salvaging the moribund stock market have failed to fix the capital market, frustrating investors and regulators alike.

The prime bourse Dhaka Stock Exchange (DSE) broad index DSEX continued to bleed and settled at a 33-month low on Wednesday.

The Bangladesh Bank on Tuesday eased advance-deposit ratio (ADR) of banks by 1-1.50 percentage point, apparently to increase cash flow of banks to kick start gloomy investment scenario for both real economy and stock business, experts say.

Earlier on Monday, Finance Minister AHM Mustafa Kamal made some lofty promises about fixing the market and addressing its deep-rooted problems. 

The Bangladesh Securities and Exchange Commission (BSEC) in July amended a number of security rules on capital raising through initial public offerings (IPO) and quota facility for the general investors, targeting to revive the market.

The commission in the same month also increased the existing one-year lock-in provision for the placement shareholders to a two-year period to boost the normal business activities of the capital market and lessen the unfair influence of private placement holders.

On Sunday, Kamal made a declaration that all 31 non-listed insurance companies must be listed by three months, or face licence cancellation in an effort to increase the number of good scrips in the market.

These initiatives have not seen any positive impact on the capital market. DSEX, the broad index of DSE, lost 40.96 points, to close at 4,888.01 points on Wednesday, lowest in more than 33 months. On December 12, 2016, the index had fallen to 4,869.

“All efforts yielded nothing but frustration,” a senior official at a brokerage house told Dhaka Tribune.

“The investors have kept losing their confidence in market regulators, Bangladesh Bank and even in the role of finance ministry,” he said, adding, “A reshuffle is now inevitable for the sake of good governance and good stock market.”

Market analysts have said stocks keep losing amid dearth of quality stocks, lack of investors’ confidence and shortage of liquidity.

Share prices in junk companies are rising abnormally, while big fundamental stocks like Grameenphone are dragging the market down. Besides, soaring non-performing loans coupled with falling foreign portfolio investment triggered further sell-off, they say.

EBL Securities in its daily market commentary said that investors’ pessimistic perception kept on panic sell pressure to avoid loss as they dread further fall. A sweep in the price of large cap stocks namely Square Pharma, Grameenphone and BATBC contributed to the market remaining on the decline.

“News such as BTRC’s severe position towards GP, withdrawal of foreign fund, no prompt solution from finance meeting minister’s meeting kept on lessening investors’ faith,” it said. 

On Monday, the finance minister headed the meeting with the stakeholders as the market lost over 300 points in a month. The finance minister assured that good stocks would be brought in and good governance would be established in the market to revive confidence. The minister also declared that a special committee would be formed.

Former finance adviser to a caretaker government AB Mirza Azizul Islam told Dhaka Tribune: “A lot of meeting took place in the past; nothing will happen with the meetings. If we do not identify actual hindrances and fix the system, nothing will be solved in the capital market.”

Mirza Azizul Islam, also former chairman of BSEC, said that good companies were reluctant to be listed with the stock market, but they should come forward.

“The obstacles which prevent them from entering the market must be addressed. In this case, a good company has to pay the premium according to their respective eligibilities,” he added. 

Talking to Dhaka Tribune, honorary professor at Dhaka University’s Economics Department Abu Ahmed said that raising the ADR was a positive move which should have an indirect effects on the capital market. But it did not happen.”

Recently, IPO quota facility for the general investors was raised to 50% from existing 40% under the fixed price method while under the book building method it was raised to 40% from 30% to build confidence in the market.

Former chairman of Bangladesh Securities and Exchanges Commission (BSEC) Faruq Ahmed Siddiqi told Dhaka Tribune that these decisions were positive for general investors but they did not yet see any positive result. 

“Money market has a major negative impact on the stock market. Lack of good company also causes continuous fall in the stock values,” Siddiqi said.