The much anticipated strategic partnership agreement between the Dhaka Stock Exchange (DSE) and the Chinese consortium of Shenzhen Stock Exchange and Shanghai Stock Exchange is nearing implementation.
Bangladesh Bank granted the consortium permission to open a fund transfer account in a letter sent yesterday. The Non Resident Investors Taka Account (NITA account) will be opened with Standard Chartered Bank.
DSE is getting nearly Tk947 crore in investment through the strategic partnership agreement in the first part of September this year.
On May 14, 2018, DSE signed a memorandum of understanding with the Chinese consortium to sell 25% of its shares to the group to make it the strategic partner of the bourse.
According to the Share Purchase Agreement (SPA), the consortium will hold 25% - equivalent to 450,944,125 ordinary shares - of DSE at Tk21 each in order to partner with the bourse.
The consortium has also offered about Tk300 crore on top of the initial Tk947 crore, for infrastructural and technological development.
In addition, they have proposed to develop the SME market, assist in product diversification, and jointly operate the V-Next alliance program in Bangladesh.
The National Stock Exchange of India had also attempted to buy a stake, but had a far lower bid than the Chinese.
Confirming the opening of the NITA account, DSE managing director KAM Majedur Rahman said: “We will transfer the shares to the Registrar of Joint Stock Companies and Firms, after opening a Beneficiary Owners (BO) account in favour of the consortium, and at the same time the consortium will send the money to our bank account”.
When the funds from the Chinese consortium are sent to the bank accounts of DSE shareholders from the government exchequer, a 15% gains tax will be levied on them. However, shareholders have urged the government to exempt the gains tax in the interest of capital market development.
DSE Director Minhaz Mannan Emon said: “Bangladesh Bank has approved the opening of the account by the Chinese consortium. Now, the formalities are over. We will get the money very soon. If we get the opportunity, then we will invest the money in the stock market.”
-Stakeholders expectations from the consortium-
After the stock market crash in 2010, stakeholders demanded that the government ensure monitoring to stop manipulation and bring transparency to the stock market, in order to restore the investors’ confidence.
Experts and stakeholders believe the consortium will help the DSE become a well regulated and technically sound stock market.
Mohammad Alauddin, a stock trader, said: “As a small investor, I would like to forget the memories of 2010. What happened was due to manipulation and careless monitoring. We only expect that the consortium will help develop a mechanism to ensure fair play in trading.”
The consortium issued a statement recently, where it said: “Based on the principle of equality, mutual benefit and win-win cooperation in compliance with Chinese and Bangladeshi laws and regulations, the consortium will advance cooperation in key areas such as trading technology, market cultivation, and product development in an orderly manner to achieve higher-quality growth.”
AFC Capital CEO Mahbub H Mazumdar told the Dhaka Tribune that the consortium and the DSE will participate in and support the Belt and Road Initiative.
Experts weigh in on the partnership
Prominent economist AB Mirza Azizul Islam said: “The Shanghai Stock Exchange and the Shenzhen Stock Exchange have a good reputation for their well-regulated operations. As a partner, they will have much to offer the DSE to improve its operations.”
It is assumed the governance of the DSE will also improve as the consortium’s involvement increases, he added.
Mirza Azizul also noted that the partnership will attract investors, both foreign and domestic, while boosting confidence among existing investors. He hoped it would also help develop new products to draw investors.
Ahmed Rashid Lali, a former vice president of the DSE, said: “The partnership will introduce a radical professional change in the administration and management of the DSE. The market will be more transparent and accountable to stakeholders.”
“In terms of operation, the DSE would reach international standards, as our technology will be significantly improved,” he added.
