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Regulatory lapses, lack of investors’ confidence major factors behind tumbling stocks: experts

  • Published at 11:32 pm September 4th, 2019
Experts who shared their opinions Dhaka Tribune

Market plunges below 5,000 mark

Stocks keep losing amid dearth of quality stocks, ineffective roles of market regulators, lack of investors’ confidence and shortage of liquidity, stock market analysts have said.

They say share prices in junk companies are rising abnormally, while big fundamental stocks like Grameenphone are pushing the market down.

Besides, soaring non-performing loans coupled with falling foreign portfolio investment triggered further sell-offs.

They are of the views that weak enforcement, active market curtail, and lack of efforts to bring institutional investors to floor are other major factors hampering the normal growth of stock business.

They say the small investors, muddled by the continued falling trend in the market and haphazard environment in the financial market, have kept selling shares amid volatility at the market.

The experts have called for long-term policy and five-yearly plan for a sustainable stock market that can contribute to the country’s Gross Domestic Products (GDP) significantly.

Faruq Ahmed Siddiqi

Former chairman of Bangladesh Securities and Exchanges Commission (BSEC) Faruq Ahmed Siddiqi has told Dhaka Tribune that lapses in regulatory and enforcement matters have led investors to continue their selling spree amid lack of confidence.

“Ensuring transparency in trading is a prerequisite for a stable share market. The regulatory body should look into the matter. Abnormal price rise in shares of some companies is common without any specific reason. The rise in prices of small capital companies is a matter of great concern,” said  Siddiqi.

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

Urging industrialists to get their firms listed, Faruq Ahmed Siddiqi says there are many benefits of getting listed with bourses as banks do not provide long-term loans which can be obtained through listing.

Former chairman of BSEC also finds that share prices in junk companies have been rising abnormally despite the absence of price sensitive information and growth in earnings, posing a threat for general investors and stability in the capital market.

Abu Ahmed

Honorary professor at Dhaka University’s economics department Abu Ahmed has told Dhaka Tribune that most of the listed companies are suffering from lack of good governance. Companies’ sponsor directors often trade shares anonymously, violating securities laws.

“They tend to make false financial reports. In this case, general investors will not invest in capital market,” Abu Ahmed has told Dhaka Tribune.

“If the stock exchanges being the primary regulators, along with the BSEC were serious and vigilant, such a grave situation in the market would not have happened,” thinks Ahmed, also a stock market analyst.

He also cites weak enforcement, particularly taking no actions against market curtail, and lack of efforts to bring institutional investors to floor as other major factors hampering the normal growth of stock business.

Highlighting on the recent sluggish trend in the country's capital market, Abu Ahmed has said that a selling pressure has been in place as investors have continued to dump their holdings to avoid further losses. 

“Specially large cap stocks like Grameenphone, British American Tobacco Bangladesh and Square Pharma had the highest impact on the negative closing of the prime index,” he asserts.

Ibrahim Khaled

Former Bangladesh Bank deputy governor Ibrahim Khaled is of the opinion that the regulatory body BSEC has the responsibility of restoring investors' confidence. But the body is not doing their desired tasks, he adds.

He says ensuring the listing of good companies in capital market is crucial for a turnaround in the market.

“On the other hand, demutualisation of stock exchanges should be independent. Demutualisation means separating management of the market from investors. But still majority stock exchange board members are themselves investors and playing the dominant role in decision making,” Khaled observes.

He hints that the regulatory lapses and investors’ lack of confidence in securities regulator have been acting as major setback for the market.

The country's prime bourse, Dhaka Stock Exchange (DSE), yesterday  plunged below the 5,000-point mark as panicked sale continues fearing further fall.

The broad index of DSE lost 20.68 points to stood 4,986 points, which is the six weeks low. This index also plunged below 5,000-mark on July 22 this year.

The prime bourse, DSEX lost 229 points in last 14 trading day or after Eid-Ul-Adha and its market capitalisation lost Tk15,063 crore.

Market operators say the investors are panicked as the market has been falling for the last few months.

Yesterday, turnover of DSE also fell to Tk375 crore, which was 5% lower than the previous day’s Tk395 crore. A total number of 119,432 trades were executed in the day’s trading session. Losers took a modest lead over the gainers as out of 351 issues traded, 166 closed lower, 132 ended higher and 53 remained unchanged on the prime bourse trading floor.

The port city’s bourse, the Chittagong Stock Exchange, also closed lower with its All Shares Price Index -- CASPI-- losing 88 points to close at 15,213 and the Selective Categories Index - CSCX – shedding 54 points to finish at 9,235.