In the given situation, investors, experts and the sector people are not happy with any temporary measures
Dhaka Stock Exchange (DSE), the premier bourse of the country, registered an 85 points gain in Thursday’s trading pulling out the market from a thirteen-consecutive weeks’ negative trend. But the question remains whether it would sustain or not. The sudden rise in the price index is an effect of a recent move by the policymakers and stock market regulators. The move to inject Tk856 crore on Thursday came after the investors took to the streets and staged rallies in protest of free fall of stock values. Since January 31 to May 2, DSEX, the key index of the premier bourse shed 534 points. The turnover at the DSE came down to Tk384 crore on Thursday, which was Tk1,034 crore on January 31. In the given situation, investors, experts and the sector people are not happy with any temporary measures as they prefer long-term and institutional measures to stabilize the market.
Recent development in wake of free fall
In the face of stock investors’ month-long protests, the government has come up with a measure to stabilize the market and stop the fall in stock prices in the country’s twin bourses. In a bid to increase the cash flow into the stock market and boost the confidence of retail investors, the government on May 2 decided to sanction Tk856 crore to the affected small stock investors through the Investment Corporation of Bangladesh (ICB). The Ministry of Finance on the same day asked the Bangladesh Bank to sanction the fund in favour of ICB, it was learnt. It is going to be the second refinancing scheme for the retail investors who had lost huge sums of money during 2010 and 2011 market crashes. In 2013, the Bangladesh Bank gave a refinance scheme of Tk900 crore to the ICB. The new refinance scheme’s tenure has been fixed as of December 2022. Meanwhile, in the second session of the 11th parliament Prime Minister Sheikh Hasina said the government had taken many steps to keep the share market stable. She also warned “If anyone wants to play [with the share market], obviously we will take action against them.” Besides, the finance minister also hinted that the corporate tax should not be increased in the in the upcoming budget, and pledged to offer policy support in the budget for businesses.
How to stabilize the market
In stabilizing the stock market the first and foremost condition is restoring the investors’ confidence, which can be ensured by enforcing regulations and protecting their rights. “The market will be stable if the Bangladesh Securities and Exchange Commission (BSEC) does their function properly. The ups and down of stocks will be based on the demand and supply of stocks,” Dhaka Stock Exchange Brokers’ Association (DBA) President Shakil Rizvi told Dhaka Tribune. BSEC should stop foul play in the market, if any. In addition, it should remain very cautious so that no company with weak financial performance can be listed in the market, he said. “There were irregularities in private placement and IPO approval, which is now taken into consideration by the BSEC and they pledged to fix the loopholes. ”As a result, investors have started regaining confidence which is a good sign for the market, he added. Meanwhile, stock brokers and experts have said long term policy should be incorporated in the budget documents for a sustainable stock market that can contribute to the country’s Gross Domestic Products (GDP) significantly. “Providing a certain amount of fund can be a temporary solution but in making the stock market a matured one, there is no alternative to policy supports that would encourage investment,” Ahmad Rashid Lali, Managing Director of Rashid Investment Services Ltd told Dhaka Tribune. Policy support such as calculating the capital market exposure on cost price basis could enhance the supply of money in the market, argued Lali. Right now, the market needs long term policy support, where Bangladesh Bank had a role to play in increasing the fund flow to the market, he added. However, economists say there must be a set of policies to woo more good companies towards the stock market. “If the government cuts corporate tax, it will attract companies to get listed in the stock market,” said Professor Abu Ahmed, a former teacher at the University of Dhaka. He also suggested offering tax rebate for companies declaring dividends of over 20%.
