Notwithstanding all the controversies and street troubles surrounding the January 05 national election a new government took oath last Sunday on the basis of its results. It remains to be seen how the new government acts in an environment that in all likelihood would be different from that prevailed during the last five years. There are indications galore that the sailing by the new government will not be at all smooth on both political and economic fronts.
It is difficult to predict how future politics would unfold. But the economy follows a set path where political events, particularly the negative ones, do leave a tangible impact. Equally important will be the government's fiscal policy and the monetary policy that is introduced by the central bank from time to time, making certain adjustments befitting to the economy's need. Another import macro-economic factor that plays an important role is the capital market.
With the installation of the Awami League (AL)-led government for the third time since the 1991 political changeover, it might be interesting to watch the developments in the capital market. The past history in this connection has not been that palatable for the AL. Rather, the party carries the stigma of two worst collapses of the stock market---the first one in 1996 and the second one in 2010. Now the question is: Will there be another bubble this time?
The prevailing circumstances in the stock market and the economy would prompt one to dismiss such a possibility instantly. But bizarre things happen in Bangladesh. In fact the situation in 1996 or in 2009/10 was not at all conducive to the stock market going crazy. But it did happen with everybody, including the government, watching from distance. Some manipulators in both the cases skillfully played the role of pied pipers to bring thousands of unsuspecting and ignorant (so-called) investors and fleeced them at ease.
Losing funds worth billions of taka the 'small investors' took to the streets and blamed the government for being a party to the slaughter of the innocent. True, investment in stocks always carries risk and whoever makes such investment does it at his/her own risk. The job of the government and the securities regulator is to ensure that market plays by the rule. It is also a responsibility of both the parties to see that the act and rules concerned are enforced with a view to protecting the interest of the investors.
During the first collapse of the market in 1996, the manipulators were in an advantageous position because of the paper-based transactions which had facilitated the entry of hundreds of thousands of fake scripts. But the situation was entirely different in 2010 when everything was automated and bourses and regulator had the necessary surveillance software installed at their respective places to detect anything going foul in stock transactions. Yet things went wrong in 2010 because the manipulators had adopted an altogether different mechanism. They exploited some provisions such as 'direct listing', 'preference share' and 'book-building' method to create the stock bubble. Unfortunately, a section of bourse leaders and the men who were in-charge of securities regulatory body had either remained indifferent or extended tacit support to the manipulators.
Everybody knows what happened after both the collapses. There were probe bodies which, as usual, produced reports. And after initial hullabaloos, the reports were kept on the administrative racks to draw dust. Nothing has happened to the people identified by the probe bodies as market-manipulators. Rather, some of them are often seen rubbing shoulders with the ruling party high-ups.
Now is there any reason to believe that another bubble would come soon? A report published in an English daily said that the market was rife with speculation that there could be another stock bubble soon. However, the circulation of such a speculation could be the work of the manipulators to watch the reaction from investors.
The market has gained more than 300 points since the polls day. The daily turnover now hovers at around Tk 5.0 billion. But the rise in stock prices and the turnover, as of now, do not indicate any major shift in market behaviour.
Despite the fact that four years are too brief a period to forget the mauling the investors had in the latest market collapse, the manipulators might again try to lure the former to the market. But they might find it quite difficult to carry out their mission this time for situation with politics and economy remains very tight. For understandable reasons, the government is unlikely to demonstrate its indifference to any unhealthy development in the stock market.
During the last three years the market saw ups and downs which were very normal in the case of a period following a crash. But in the second half of 2013 the market regained stability excepting for a few disturbing developments involving some low-cap stocks and newly listed issues. It seems that the securities regulator has not been doing enough to address these developments.
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