They also called for product diversification such as a bond market and the introduction of a buyback policy to protect investor rights, and stopping regulatory intervention in market operations
Stock market stakeholders yesterday urged its regulator to make initial public offerings (IPO) simple and transparent, to attract multinational and quality companies to the markets. They also urged the latter to create opportunities for small and medium enterprises (SMEs) to raise funds and combat the Covid-19 fallout.
They also called for product diversification such as a bond market and the introduction of a buyback policy to protect investor rights, and stopping regulatory intervention in market operations.
They made these demands and recommendations at a virtual dialogue, “Capital Market and Covid-19: Charting Impact and Path to Recovery,” organized by Resurgent Bangladesh.
Resurgent Bangladesh is a joint initiative of the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), Dhaka Chamber of Commerce and Industry (DCCI), Chittagong Stock Exchange (CSE), Business Initiative Leading Development (BUILD), and Policy Exchange.
“Companies with a strong financial base do not want to be listed in the stock market due to lack of transparency in the IPO process and overall market operations. The IPO process needs to be simple and ensure better share prices,” said MCCI president Nihad Kabir.
There are very few (seven to eight) companies listed in the country’s stock market, where foreign investors are eager to invest, she claimed.
Quoting foreign investors, the trade leader said there is lack of transparency and accountability in the markets, which is a barrier to making the market vibrant.
On top of that, there are allegations of interference against the stock market regulator, Bangladesh Securities and Exchange Commission (BSEC). These problems need to be addressed, Nihad added.
Responding to the allegation, BSEC Chairman Prof Shibli Rubayat Ul Islam said: “We do not interfere in the market, but work on the implementation of regulations in the stock market.”
"Our stance is against manipulation to protect the rights of investors," he refuted.
It is high time to invest in the stock market and brokerage houses should invite foreign investors to make investments here, he added.
The Chittagong Stock Exchange (CSE) urged the regulator to make the IPO process easy and pave the path for SMEs to raise funds using the SME platform already introduced.
“In bringing more companies to the trading floor, the BSEC should encourage SME financing from the capital markets by simplifying the small cap listing process,” said CSE managing director Mamun-Ur-Rashid, in his keynote presentation.
The CSE managing director also requested expanding the tax gap between listed and non-listed firms as per international practice to motivate more and better companies to get listed.
Azam J Chowdhury, president of Bangladesh Association of Publicly listed Companies (BAPLC), urged the regulators to bring manipulators to book and stop foul play in the markets.
Stakeholders who took part in the dialogue put much emphasis on the development of a secondary bond market effectively, and reviewing the tax policy to avert double taxation on dividend incomes.
Managing Director of Investment Corporation of Bangladesh (ICB), Md Abul Hossain, said the ICB has invested Tk11,000 crore in the stock market from various institutions.
But the ICB lost its capacity to invest due to the Covid-19 pandemic, he added.
Market cap to GDP lowest in Asia
Both DSE and CSE's capitalization to GDP is the lowest among the Asian countries.
As of June, 2020, the market capitalization to GDP ratio of DSE was 11.12%, and 8.72% for CSE.
This is due to the impact of Covid-19 pandemic. As of January, the market capitalization to GDP was 12.12% and 9.60% for DSE and CSE respectively.
In June, stock market capitalization to GDP ratio was 104.07% at Bursa Malaysia, followed by 74.31% at BSE India, 43.78% at Indonesia Stock Exchange, 17.63% at Colombo Stock Exchange and 17.63% at Pakistan Stock Exchange.
At the same time, the market capitalization to GDP ratio at Singapore Exchange was 185.99%, followed by 195.05% Taiwan Stock Exchange, 116.41% at Japan Exchange Group, 101.70% at Stock Exchange of Thailand, 71.18% at Philippine Stock Exchange, 35.62% at Shanghai Stock Exchange and 24.43% at Shenzhen Stock Exchange.