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Stock Market Slump: Experts call for boosting investors’ confidence

  • Published at 09:51 pm April 15th, 2019
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Representational photo: Bigstock

On April 10, the turnover hit one-year low

The recent drop in the stock market is due to confidence crisis and the authorities concerned have failed to boost their confidence, say stakeholders.

They suggest that stock regulator Bangladesh Securities and Exchange Commission (BSEC) should put emphasis on quality initial public offering (IPO) to recoup the investors’ confidence.  

IPO is necessary for the stability of the capital market, but it should be ensured that companies with weak fundamentals do not get IPO approval and the regulators should assess more meticulously before approving IPOs, they think.

The market operators have called for sustainable market, approval of scrips netting, opening new branch or booths for brokerage houses and amendment to the book building method.

The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), lost about 550 points in the last three months. Turnover, another important indicator of the market, also dropped.

On April 10, the turnover hit one-year low. On the day, the market capitalization stood at Tk392895 crore, which was Tk4,10,531 crore on January 10.

on Monday, the broad index of DSE gained 16.92 points. At the end of the day, the index closed red at 5309.47 levels with 0.32% decrease from the previous day. 

All the large cap sectors showed negative movements except Telecommunication and Fuel and Power. Telecommunication exhibited the highest positive movement with 2.61% gain and banks exhibited the highest negative movement with 2.14% loss. 

Former adviser to a caretaker government AB Mirza Azizul Islam, talking to the Dhaka Tribune, stressed the importance of bringing in good companies in the market to restore the confidence of the investors. 

“When people will find that they can make profit by investing here and will not be harmed by taxation, only then they will come forward to invest more in the market,” he observed.

Banks fulfilled the existing demands of private sectors, so the companies were shy about raising funds from the capital market, he said, adding there should be coordinated efforts from all the regulators to bring good companies in the market.

Dhaka Stock Exchange Brokers' Association (DBA) president Shakil Rizvi also attributed the recent drop in stock market to confidence crisis and stressed that standard IPO was essential to overcome the crisis. 

Shakil Rizvi demanded that IPOs of quality companies should be approved so that the investors got better dividends and did not lose their money.

The DBA president said: “If good companies do not apply for the IPO, we must look for them and continue our efforts to bring them in the market.”

“Bring quality companies in the market to boost investors’ confidence,” he added.

Talking to the Dhaka Tribune, Pujibazar Biniogkari Oikya Parishad president Mizan-ur-Rashid Chowdhury said that share prices of 76 listed companies were currently below the face value. 

But as the regulatory body, the BSEC was not taking any action against them, he pointed out, adding that the government should install buy-back law for restoring confidence of stock market investors. 

He demanded closure of the 'Z' category or OTC market in the share market.

“A group is manipulating the market to lower the prices and steal money. Small investors are facing massive losses,” he alleged, demanding a probe to identify the perpetrators.

Former Bangladesh Securities and Exchange Commission chairman Faruque Ahmed Siddique said that the market really needed strong companies and the regulators should take all necessary steps to bring them in the market. 

He also said that share prices of many companies came down to the bottom level, which created doubt among investors about the companies’ business intention.

‘IPO is necessary for the stability of the capital market, but it should be ensured that companies with weak fundamentals would not get IPO approval, the regulators should assess more deeply before giving approval to IPOs,” Faruque said.