Experts pinpoint weak areas of capital market

FE REPORT | Published: October 03, 2020 22:53:30

Discussants said long term investments and proper coordination among the regulatory bodies should be inspired to ensure the due role of the country's capital market in national economy.
Their observations came Saturday at a webinar titled 'The Role of Capital Market for Bangladesh's Development'.
The Bangladesh Securities and Exchange Commission (BSEC) organized the webinar to celebrate the World Investor Week (WIW) 2020.
Finance Minister AHM Mustafa Kamal attended the webinar as the chief guest while Salman F Rahman MP, private sector industry and investment advisor to the Prime Minister, was the special guest.
In his speech, Mr. Kamal attached importance to development of the capital market to accelerate the country's economic growth.
"The capital market is the base of economic development. We have market supportive fiscal policy," said the finance minister.
Following the demand of ensuring the supportive role of National Board of Revenue (NBR), the finance minister said the revenue board must help the businesses for the sake of the country's economy.
"The government was able to offer incentives worth $13 billion amid pandemics to keep the business operations unaffected. We will not fail," said Mr. Kamal.
Prime Minister's advisor Salman F Rahman said the growth of the country's capital market was not rational with the country's economic growth observed in last ten to twelve years.
"The growth of tax to GDP ratio and market cap to GDP ratio is satisfactory in other countries. But the growth of these two ratios is contradictory in Bangladesh," Mr. Rahman said. He said the country's capital market should be strengthened to attract foreign direct investments.
"Another weak area of the capital market is the mutual fund having very funny structure. Reputation of renowned sponsors becomes questionable due to poor performance of mutual funds," said Mr. Rahman.
He said another structural problem of the market is greater participation of retailers in turnover compared to institutional investors.
"Policies framed by the securities regulator should also be consistent," said Mr. Rahman.
He said Walton Hi-Tech Industries has become the second largest company of the capital market despite offloading just 1.0 per cent shares of total paid-up capital.
"What will the securities regulator do if other companies want to be listed with the stock exchanges offloading only 1.0 per cent shares? So, policies should be consistent."
The president of Bangladesh Association of Publicly Listed Companies (BAPLC) Azam J Chowdhury said long term investments are very much needed for the capital market.
He said mega projects should be listed with the stock exchange. "Investors will be inspired if the mega projects are listed with the stock exchanges."
He said the capital market should be the main source of long term investments as banks are unable to provide long term loans.
The chairman of Central Depository Bangladesh Limited (CDBL) Sheikh Kabir Hossain said market prices of mainly listed companies do not sustain after listing as their fundamentals do not support the prices.
"Financial statement should be scrutinised properly while approving IPO (initial public offering) proposals so that investors are not deceived after listing," Mr. Hossain said.
Barrister Nihad Kabir, president of Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), said the number of listed securities is yet to be up to the mark compared to 90's.
"Long term investments should be attracted along with spreading investment literacy among general investors," she said.
She said the securities regulator should dig out the reasons hindering the listing of many local companies having good fundamentals.
"Pricing of shares is one of the reasons which discourage good companies to go public. Junk shares are traded at high prices while companies having good fundamentals are traded at lower prices," said the MCCI president.
BSEC commissioner Prof. Dr. Shaikh Shamsuddin Ahmed moderated the webinar while another commissioner Prof. Dr. Md. Mizanur Rahman presented a keynote speech in the webinar.
BSEC chairman Prof. Shibli Rubayat Ul Islam said the securities regulator wants to work taking the advices and supports of stakeholders to ensure development of the country's capital market.
"Transparency eases the life of all. We are trying to bring clean environment in the capital market," said Mr. Islam.
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