Market capitalization at Dhaka Stock Exchange (DSE) has increased by Tk51,337 crore in the last 37 trading sessions of this current fiscal year (2020-21) amid growing general investors’ confidence over regulatory moves to revive the sinking market.
As of Tuesday, the DSE market value rose to Tk3,63,112 crore from the Tk3,11,775 crore that was on July 2.
Meanwhile, the key index, DSEX, of Dhaka bourse gained 794 points during the period. The index of the DSE was at 3986.73 points on July 2, which climbed to 4781.57 points on August 25.
With the gain in key indices, the prime bourse has witnessed sharp gains in turnover. Daily average turnover at the Dhaka Stock Exchange has crossed the Tk700 crore mark.
Talking to Dhaka Tribune, stock analysts and market insiders say growing investors’ confidence buoyed by the campaign of the new leadership of the Bangladesh Securities and Exchange Commission (BSEC) against manipulation, mandatory shareholding issue and plans to work on junk stocks have encouraged investors to take positions on stocks.
The incumbent commission under the leadership of Prof Shibli Rubayat-Ul-Islam launched the drive against wrongdoers on June 23. So far it has imposed around Tk44 crore in fine on about 50 people and institutions.
Prof Shibli Rubayat-Ul-Islam told Dhaka Tribune that the recent steps taken by the commission, aimed at protecting retail investors’ rights and regaining their confidence, had begun giving out positive outcomes.
Market insiders say after the commission went for tough action against wrongdoers, the market started rising due to investors’ growing confidence in the regulator.
Talking to Dhaka Tribune, stock market analyst and honorary professor at Dhaka University's economics department Abu Ahmed said the commission was trying to bring order to the market with disciplinary action, a process that should be continued. Investors are getting their confidence back due to some punitive measures taken by the commission, he added.
Abu Ahmed suggested the regulator should also improve governance in the junk companies with tough measures.
Market insiders have said a gradual reopening of economic activities in the country amid the coronavirus outbreak had also been a driving force in the turnaround.
Stakeholders have also said the market had been on an upswing in recent times due to investors' share purchasing frenzy as they were in the expectation that the prices of shares would rise further.
According to the monthly review of Dhaka bourse, the market capitalization to gross domestic product (GDP) ratio on the DSE fell to 9.41% as of June, 2020, which was 15.06% in January, 2019.
Experts and stakeholders suggest that the stock market regulator should put emphasis on quality IPO to increase the market capitalization to GDP ratio.
A former adviser to a caretaker government, AB Mirza Azizul Islam, told Dhaka Tribune: “The stock market is a great source of funds, but its true potential is still untapped”.
“To attract entrepreneurs, the government has to set an example by offloading shares of state-owned companies to the stock market,” he said.
Islam, who is also a former BSEC chairman, added that the stock market regulator, stock exchanges and issue managers also had their key roles to play in attracting companies to get listed on the bourses.
