In 2014, the market capitalization to GDP ratio of Dhaka Stock Exchange (DSE) was 24%, which came down to under 10% in June this year. The size is the lowest among the emerging bourses in the Asia-Pacific region.
The market capitalization was Tk 3,11,966 crore in June which was 9.41% of the country’s gross domestic product (GDP), according to the monthly review of Dhaka bourse.
Analysts and market insiders point out lack of good companies in the market as the primary reason behind the falling market cap to GDP ratio. Another major reason cited by them was investors' confidence crisis.
To attract good companies, experts suggest simplification of listing process and bringing government companies to the market to become examples for others.
Market capitalization, or market cap, is calculated by multiplying the total number of a company's outstanding shares with the current market price of shares.
The ratio was at its highest at 50.67% in 2010, which came down to 33.23% within a year after the biggest market crash in the country’s history in 2010-11. The ratio was 12% in 2019, 17% in 2018, 21% in 2017, 20% in 2016 and 21% in 2015.
The market cap to GDP ratio of the country's primer bourse Dhaka Stock Exchange is the lowest among the emerging Asian-Pacific countries.
In June 2020, stock market capitalization to GDP ratio was 62.75% at BSE India, followed by 97.19% at Bursa Malaysia, 35.83% at Indonesia Stock Exchange and 14.92% at Colombo Stock Exchange.
In the same time, the market capitalization to GDP ratio at Stock Exchange of Thailand was 89.29%, followed by 205.15% at Taiwan Stock Exchange, 109.89% at Japan Exchange Group, 161.49% at Stock Exchange of Singapore, 61.95% at Philippine Stock Exchange, 37.23% at Shanghai Stock Exchange and 27.70% at Shenzhen Stock Exchange.
Experts and stakeholders suggest that stock market regulator Bangladesh Securities and Exchange Commission (BSEC) should put emphasis on quality IPOs to recoup investors’ dented confidence.
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.
He, who was also a former BSEC chairman, added that the stock market regulator, stock exchanges, and issue managers also had a key role to play in attracting companies to get listed on the bourses.
Stock market regulator, the Bangladesh Securities and Exchange Commission (BSEC) Chairman Prof Shibli Rubayat-Ul-Islam told Dhaka Tribune, “We are trying to increase financing through the capital market. We will establish the concept that the capital market is the main source of funds for industrialization”.
“We are working on approving the initial public offering (IPO) of good and established companies. We have already cancelled IPO proposals of some companies based on our negative observations and those of the stock exchanges themselves” he said.
The BSEC Chairman also said that the commission would advocate for restoring and enhancing incentives for the stock market listing of well-governed and performing companies.
