Finally, after much waiting and searching, the Dhaka Stock Exchange (DSE), the country's prime bourse, is going to have, hopefully, a strategic investor as its shareholder. The Shanghai Stock Exchange and Shenzhen Stock Exchange have proposed to take up together 25 per cent of the equity of the DSE by offering Tk.22 for each share of Tk.10. They have also offered a sum of $ 37 million to the DSE as technical assistance.
The requirement of a strategic partner was mentioned in the Demutualisation Act which paved the way for separation of management of the DSE from its trading operation. But shareholding restructuring of the bourse could not be carried forward until a strategic investor was found. The basic qualification of such an investor is that it must have experience and expertise in the development of bourse and the capital market. After repeated attempts, the DSE would be successful in partnering itself with the Chinese stock exchanges, provided the Bangladesh Securities and Exchange Commission (BSEC), the regulator, approves such partnership.
Of the total equity capital of Tk.18.03 billion, 40 per cent was taken up by the existing brokers with TEC (Trading Entitlement Certificate) rights but these broker-shareholders did not have to pay any fresh money towards subscribing the shares they got. They got these shares, after the revaluation, by dint of their past shareholdings in the DSE. The rest 35 per cent of the equity capital is supposed to go to the public. How and when that part of equity will be floated, we do not know yet.
In many countries, a demutualised bourse goes public by floating shares and then listing on themselves. It is not yet known whether the DSE, after selling its 25 per cent of equity shares to the proposed strategic investor, will go for public issue with the rest 35 per cent of the equity capital.
The investors here at home always want that the DSE goes public so that they could also participate in its equity shares and, by extension, benefit from its business. If the DSE goes public, the operation of the bourse will be even more transparent.
Will the DSE be a profitable organisation after selling its equity shares to the relevant parties? Definitely, it will be. In fact, it is already so. In future, after full demutualisation and selling all of the shares its profit will only go up with increased trading. Also in the coming days, the nature of investment options will be widened by inclusion of instruments like bond, derivatives and other types of stocks, besides the common stocks. With the inclusion of the representative of the strategic investor in the management board, it is hoped that more businesses will come to the DSE. But at present, the main source of business for the shareholders or the TREC holding members of the DSE is the commission income from share trading. All the existing shareholders in the DSE are the TREC holders, which they acquired by virtue of their ownership in the bourse from the old days and we do not know whether the strategic investors will also be offered the TREC or trading rights. We presume, they will also have the same right. Until the DSE earns more money from the more of diversified sources for its equity subscribers, the TREC will remain the most attractive avenue for earning for its shareholders.
As the DSE will, hopefully, become a hugely profitable organisation in the coming days, we suggest the Government of Bangladesh should also opt for a small percentage of equity ownership in it. At present the government receives various kinds of taxes from the DSE but its ownership through equity holding, no matter how small, will give it much more profit.
Choosing the offer of Shanghai-Shenzhen consortium was an easy task for the members of the Board of Directors of the DSE, as their offer per share was much higher than the one offered by the other consortium led by the National Stock Exchange of India. In fact, the Chinese consortium, with their market capitalisation of $ 8.0 trillion, drew the investors from across the globe. We hope the BSEC would accord its approval in favour of the Shanghai-Shenzhen Consortium. However, any inordinate delay in giving approval will only delay the completion of the demutualisation process itself and will keep the investors waiting to see what happens next.
Abu Ahmed is Professor of Economics, the University of Dhaka. [email protected]
