The country's stock market has long been in a state of turmoil. While fluctuations in share prices are natural, the volatility of the capital market has escalated to scandalous levels, an unusual trend seldom found in other bourses worldwide. During the previous government's 15-year tenure, billions of taka, allegedly, was looted from the stock market through price manipulation and fraudulent schemes such as the listing of weak or non-existent companies and the artificial inflation of their prices. Thus the market repeatedly experienced boom-and-bust cycles, causing millions of stock investors to lose money, which driven some even to commit suicide. Manipulators allegedly worked in cahoots with some of the regulatory officials to create hype in the market and then to get away with their loot. Probe committees formed to investigate those scams were no more than eyewash, facilitating manipulators to go scot-free.
Since the Stock Exchange was not managed on healthy lines, the objectives of the capital market could hardly be achieved. Ideally, the objective of Stock Exchange is to keep citizens saving in a liquid form so that they may be able to encash it at short notice (by selling the equity); secondly, to distribute the capital across the nation; and, finally, to create stake of a large number of small investors in industrial productivity and economic stability. Instead, the bourses of the country proved to be riskier than gambling, with unscrupulous people making obscene money at the expense of unsuspecting investors.
Following the dramatic downfall of the Hasina government on August 5, the stock market was showing the signs of revival after a long lull. On the last trading day of the ousted government, the country's premier bourse Dhaka Stock Exchange (DSE) stood at 5,229 points. From there within five days, the index had gone up to 6,016 marks by August 11 driven by heightened optimism as investors looked forward to a fresh start and a more stable political landscape. Many placed new bets on large-cap and blue-chip stocks, hopeful that this shift would bring a return to good governance. Investors hoped that market would turn around under the new government and new leadership from the Securities and Exchange Commission (BSEC).
But the market's upward trajectory was short-lived. In the last two and half months, the market lost over 1,000 points, causing the bourse to lose a whopping Tk 662 billion. By last Sunday, the index had fallen its lowest point in almost four years to 4,965 points, prompting hundreds of protesters to take to the streets and call for the resignation of the newly appointed BSEC Chairman Khondoker Rashed Maqsood.
The question is why the capital market hit such a stumbling block after a promising start under the interim government. Are the manipulators at it again? Did they exploit the August 5 political shift to create market hype and exit with their gains? Given the sensitive and complex nature of the market, which is vulnerable to manipulation, determining whether recent fluctuations were the result of such activities will require a thorough investigation. BSEC has already formed a four-member committee to determine the reasons behind the ongoing decline in stock prices. The panel has been given 10 working days to submit its report. It is hoped that the probe committee will get to the bottom of it and find out its real cause.
The current macroeconomic situation, plagued by political uncertainty, worker unrest, sluggish businesses, and industrial slowdown, also casts a shadow over the stock market. Bangladesh Bank's aggressive rate hikes to curb inflation have driven up interest rates on fixed deposits and other savings instruments, causing some investors to shift their funds from the capital market to the money market.
Additionally, some observers also blame SEC for taking hasty and uncoordinated actions when imposing market corrections. Several investigative committees have been formed to examine various irregularities, including share manipulation across many companies. As a result, panic has spread throughout the entire market. Large individual investors, in particular, have started to exit the market for fear of facing penalties, contributing to the significant price drop.
The retreat of institutional investors has created a significant shortage of buyers in the market. Meanwhile, many indebted investors are facing forced sales of their shares. As the market continues to decline, the pressure for these forced sales only increases. The imbalance of more sellers than buyers, coupled with falling prices, has led to a decrease in transaction volumes. According to Central Depository Bangladesh Limited (CDBL), in the first 14 working days of this month alone, 6,500 investors have sold all their shares, leaving their accounts empty. On the other hand, businessmen who benefited during the Awami League government have become inactive in the market. This inactivity is another reason for the persistent drop in share prices.
Amid such a multitude of factors plunging the stocks, the government faces a two-pronged challenge: boosting trading activity, while addressing long-standing issues of corruption and manipulation and bringing manipulators to the book without creating panic in the market. The government has already formed a task force to implement comprehensive reforms, including stricter regulations and enhanced enforcement. Besides, to stabilise the market, the government is reportedly considering providing liquidity support to the Investment Corporation of Bangladesh (ICB) and expediting the listing of government companies as well as good private companies with sound portfolios.
A prolonged downward trend in the indices will have serious implications for both the capital market and the broader economy. Small investors are calling for urgent government intervention. They lament that despite the presence of three prominent economists in the new government, the administration has yet to take significant action to stabilise the market. The interim government, entangled in a multitude of issues, cannot simply wash its hands of the ongoing debacle in the capital market. A measured response - through effective regulatory measures, robust oversight, and supportive investor policies - will be crucial for restoring confidence and long-term recovery of the market.
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