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Inside the DSE’s strategic partnership with the Chinese consortium

  • Published at 12:16 am May 14th, 2018
  • Last updated at 11:51 am May 14th, 2018
dhaka stock market DSE
File photo of Dhaka Stock Exchange Limited Dhaka Tribune

The strategic partnership with the Chinese consortium that is under way will improve the Dhaka Stock Exchange’s (DSE) brand image, attract foreign investment, and restore investor confidence. The sale of 25% of the DSE shares to a Chinese consortium was greenlit recently.

The consortium is composed of the Shenzhen Stock Exchange (SZSE) and Shanghai Stock Exchange (SSE).

The two parties will sign the Share Purchase Agreement (SPA) today to complete the sale. The sale was approved on May 3 by the Bangladesh Securities and Exchanges Commission.

The DSE will be selling 450,944,125 ordinary shares at Tk21 each to the consortium in exchange for over Tk946.9 crore. Although the Chinese consortium had bid Tk22 initially, it lowered the price since the DSE had paid out 10% dividends in 2017.

The National Stock Exchange of India had also attempted to buy a stake, but had a far lower bid than the Chinese.

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 own operations.”

It is assumed the DSE governance will also improve as the consortium involvement increases.

Mirza Azizul also noted that the partnership will attract investors, both foreign and domestic, while boosting confidence among existing investors. He hoped it would develop new products to draw investors.

Ahmed Rashid Lali, a former vice president of the DSE, said: “The partnership will introduce 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 standard as our technology will be significantly improved,” he added. 

What stakeholders expect from the Chinese

After the stock market crash in 2010, restoring investors’ confidence and ensuring monitoring to stop manipulation and bringing transparency were key demands from the stakeholders. 

Experts and stakeholders believe the DSE expects a well-

regulated and technically sound stock market for the betterment of the investors as well as the shareholders with the help of the consortium. 

Mahbub H Mazumdar, CEO of AFC Capital, a merchant bank, told the Dhaka Tribune that the consortium and the DSE will participate in and support the Belt and Road Initiative.

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 the consortium to 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.”

What the consortium has offered

The consortium has offered an additional Tk3.7 crore for infrastructural (mostly technological) development.

In addition, they have proposed to develop an SME market, assist in product diversification, and jointly operate the V-Next alliance program in Bangladesh. Furthermore, the DSE is being offered assistance in mapping information disclosure and investor service automation framework, developing human resources, and technological support to develop the DSE portfolio.