The new commission that took charge in May immediately got down to instilling a solid sense of discipline in Bangladesh’s capital market
The Dhaka Stock Exchange’s market capitalisation has never been higher. It has been edging up over the last few days, and with each increase, a new record was set.
Yesterday, it closed at a record high of Tk 444,203 crore. And today, it will most definitely close at a higher note.
The outpouring of investor interest is all because of the positive regulatory moves the new commission that took charge in May has been taking to instil a solid sense of discipline in Bangladesh’s capital market.
The new commission’s most notable work could be found in issues of market manipulation, mandatory shareholding by sponsor-directors and junk stocks, all of which gave confidence to retail investors to park their funds at the bourse.
“In the last 10 years, the stock market was not allowed to run normally. The regulatory body controlled the index, causing damage to the confidence of investors,” said a stockbroker requesting anonymity to speak candidly on the matter.
Investors’ confidence on the new commission along with favourable economic indicators and resumption of economic operations have tempted the seasonal retail investors to pour fresh funds into the market, said Shakil Rizvi, a director of the DSE.
“All our steps were taken with the retail investors’ rights in mind,” Shibli Rubayet ul Islam, chairman of the Bangladesh Stock Exchange and Commission, told Dhaka Tribune.
The new commission will work towards establishing the concept that the capital market is the main source of funds for industrialisation.
“We do not interfere in the market -- we simply focus on implementing the regulations in the stock market. Our stance is against manipulation to protect the investors' rights,” he added.
Soon after taking charge in May, the new commission moved to crack down on junk stocks or Z category companies, as those are used by the rogue players for market manipulation. It also issued directives to straighten up the companies’ commercial operations and bring in good governance.
The BSEC took enforcement actions against several violations and imposed penalties to issuer companies, directors, auditors and market intermediaries.
In what can be viewed as a bold move, the BSEC directed listed companies that lent to their associated companies at free of interest to refund the sum with interest.
The associated companies are usually owned by sponsor-directors of the listed companies.
“Providing loans to associated companies may serve the interest of the companies’ connected people while damaging the interests of the general investors,” said a high BSEC official requesting anonymity to speak candidly on the matter
The commission also took steps over non-disbursement of dividends of listed companies.
“We sought the information about the unclaimed and undistributed dividends, which tend to remain idle in the companies’ accounts for years,” Islam said.
Non-disbursement of dividends affects the listed companies’ governance and hampers the confidence of general investors, he said, adding that the regulator has recently taken steps against some companies on this ground.
The BSEC also took the initiative to reform the over-the-counter (OTC) market of both the stock exchanges.
It also simplified the rules for capital raising through initial public offerings (IPOs).
While the country’s private investment is going through a stagnant situation, the stock market regulator has given the nod to 19 companies this year for raising Tk 1,580 crore by offloading shares to the public for business expansion.
In September, the regulator decided to increase transparency in mutual funds by making it mandatory to make every portfolio-related statement public.
In the same month, the commission warned that it would take strict action against share price rumours on social media platforms.
At the same time, it warned that anybody using the logos of the BSEC, the DSE or the Chittagong Stock Exchange to spread rumours would be punished under the Securities Act and Digital Security Act.
Recently, alongside spreading rumours about the stock market, several Facebook groups and pages have been posting price-sensitive information and predicting future prices of some stocks, in violation of security rules.
The stock market regulator approved the ‘Digital Booth (Stockbroker/TREC holder) Rules, 2020’, allowing stockbrokers to set up digital booths under the supervision of its respective head office or branch offices.
The booth can be opened at union centres at upazilas, business centres at the district level and also commercial areas overseas.
“The capital market has been expanding day by day. Therefore, we feel this was a necessity for our business expansion,” said Sharif Anwar Hossain, president of the DSE Brokers Association.
After the stock market crash in 2010, the BSEC had put a bar on opening brokerage house branches beyond the capital.
The stock market regulator is also taking an assured step in ensuring the sponsor-directors hold 2 per cent of the company’s stakes individually and 30 per cent collectively.
Companies that failed to meet the shareholding requirement within the deadline will now have their boards recast.
The BSEC has strengthened its market surveillance and intelligence activities and enhanced its coordination with the other regulators and market intermediaries.
It has also taken steps to increase the transparency and accountability of the IPO approval process.
The commission also took the initiative to introduce Sukuk bond, perpetual bond, green bond and municipal bond; strengthen financial literacy programme to improve the awareness of investors and issuers.
All in all, 2020 will go down as the year in which Bangladesh’s stock market took a step in the right direction.