DSE to propose introduction of share buyback system

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FE Report
The Dhaka Stock Exchange (DSE) is expected to propose today (Thursday) the introduction of share buyback system in order to 'save' the investors in the falling market.
The country's prime bourse is set to put forward the proposal during a meeting scheduled for today between its leaders and the Prime Minister. It is also expected to make some proposals concerning the budget for the next financial year at the meeting to be attended by the Finance Minister.
"The buyback system will save the investors in the falling market," Rakibur Rahman, DSE president, who will lead a 31-memebr team, told the FE. The DSE delegation will also apprise the Prime Minister and the Finance Minister of the current market situation, he said.
Buyback is reverse of issue of shares by a company where it offers to take back its shares owned by the investors at a specified price; this offer can be binding or optional to the investors.
Companies buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.
Reasons for buybacks include putting unused cash to use, raising earnings per share, increasing internal control of the company, and obtaining stock for employee stock option plans or pension plans.
The DSE president said the system is in place neighbouring Pakistan and India. "Unfortunately, we are yet to introduce the system", he said.
"Several companies both in India and Pakistan have repurchased their shares following slump in their share prices because of the global financial meltdown," he added.
The DSE will place a set of budgetary proposals, including tax-free investment of undisclosed money in the stock market, withdrawal of double taxation policy and increase tax-free investment ceiling from the existing Tk 0.5 million to Tk 1.0 million.
"This system is unjust and irrational and a stumbling block to the growth of the stock market. So we want an end to it," Rakibur said adding the double taxation policy also discourages the investors from investing in the market.
The bourse will also propose to bring down the income tax rates for the listed banks, insurance and non-banking financial institutions (NBFIs) to 35 per cent from the existing 45 per cent, saying that this step will increase the capacity of the listed financial institutions to disburse higher cash dividends.
To encourage the listed companies to declare higher dividends, the DSE will also recommend cut the tax in proportion to their dividend declaration.
To make the market sound and vibrant, the bourse will also put forward some other demands, including measures to raise capital from the stock market to finance the country's infrastructure development.
It will request the government to raise funds from the stock market for various projects like Padma Bridge, flyovers, elevated express way and highways.