Finance Adviser Mirza Azizul Islam strongly criticised Saturday the performance of 'Z' category companies and suggested suspension of trading of their shares for the sake of investors and the capital market.
The finance adviser was speaking at a seminar on 'Contemporary Issues in The Capital Market and The Road Ahead' organised by the Citibank, NA, Bangladesh in a city hotel.
To stimulate the country's stock markets, the finance adviser focused on debt instruments like securitisation and bond. The local entrepreneurs should be encouraged to come to the market to raise fund for their business expansion instead of bank loan.
He said: "Representation of various sectors is insignificant in the market, dominated by only financial institutions. But in order to widen the depth of the market, participation of other sectors like manufacturing, services and other sectors are required."
Expressing dissatisfaction about the entrepreneurs' reluctance to get listed their companies on the stock markets, he said, entrepreneurs are reluctant to raise capital from the stock markets citing hassle as the reason and also that they might not get fair prices of the initial public offerings (IPOs).
"But it is their misconception as the situation has changed, I believe," he said.
"It is necessary to convince the entrepreneurs that SEC does not determine the prices of the IPO. But the IPO prices are determined in line with the company's financial strength," he added.
Mirza also said: "My own perception is that we all are loath to the accountability. The entrepreneurs are only accountable to the banks if they take loan from banks to expand their business."
"But entrepreneurs have to become accountable to the hundreds of shareholders if their institutions are listed," he said.
He said the government plans to raise fund from the stock market to finance construction of the Padma Multipurpose Bridge.
"Besides external resources, some Tk 40 billion more is needed to construct the bridge. Of which, a portion of the fund will be raised from the stock market," Mirza said.
"Some Tk 3.0 billion will also be taken as loan through securitisation of Jamuna Multipurpose Bridge," he added.
"The market lacks various debt instruments. So, we need to diversify the instruments to offer various options to the investors to minimise the risk of investment," he added.
The country's market has improved a lot as it is going through a lot of reforms over the years, he said adding that the market capitalisation increased overwhelmingly compared to the other capital markets of the developing countries and stability has largely been restored.
"But the stock markets contribution in GDP is insignificant compared to other developing countries," Mirza said.
Referring to the listed state-owned enterprises (SOEs), including Titas Gas and Jamuna Oil, he said the government is making efforts to offload shares of more SOEs to increase supply of quality shares in the market.
The Securities and Exchange Commission (SEC) has already made considerable progress towards making the market more transparent and operationally sound, but it has still long way to go.
"The regulatory body will have to respond to the contemporary changes for making the market vibrant and transparent," he added.
For long, the SEC is working to create compensation fund to be filled from penal actions against the errant companies for the affected investors, he added.
"Many investors are not conversant with the capital market as they are void of proper knowledge about the stock markets and companies. They only expect the market continue to rise, which is thoroughly unrealistic," he pointed out.
He said the investors should know every rising market should have a pause. They should make investment taking into account fundamentals of the companies.
Mr Mirza came down heavily on Z-category companies saying the trading of those companies should be suspended for the interest of the investors as well as the capital market.
He underscored the need for introducing modern and sophisticated technology to ensure smooth operation of the stock markets.
"Well-trained and educated personalities are also indispensable to make the market operationally efficient and sound," he added.
Member of Securities and Exchange Commission (SEC) Mansur Alam, Executive Director of SEC Farhad Ahmed, CEO of Dhaka Stock Exchange (DSE) Salahuddin Ahmed Khan, former DSE president Abdullah Bokhari and Managing Director and Citi Country Officer, Bangladesh Mamun Rashid were present at the seminar.
