The Bangladesh stock market has passed yet another uneventful period during the outgoing calendar year 2014.
Except for a few orchestrated brief flare-ups, the market has been dull and drab throughout 2014. The so-called reforms, most of which have remained half-done, have failed to inspire the genuine investors to put in their money in stocks for a reasonable period of time.
On the first day of the year 2014, the general index (DSEX) of the country's main bourse, the Dhaka Stock Exchange (DSE), was 4286, the lowest of the year. The year's trading ended at the DSE with its main index, the DSEX, reaching 4865 points on Tuesday.
The general index reached the highest level on October 12 at 5334 points and the highest turnover was recoded on September 18 at Tk.12.88 billion. The DSE saw the lowest turnover at Tk. 1.37 billion on December 11 last when the world's number one NASDAQ trading technology was introduced in the DSE!
For unknown reasons, the market witnessed a sudden surge in stock prices in the months of September and October of 2014. There was a substantial rise in both volume and value of daily transactions during the period. However, both declined steadily in the latter days, that too, for unexplained reasons.
Market analysts, usually working in merchant banks and asset management companies, cite a variety of reasons for every fall and rise. But those appear to be too academic and do not have any relevance to the underlying causes of erratic behaviour of the market.
Most stock markets across the world would surely react to any major positive or negative developments at home and abroad having implications on their respective national economies. But that does not happen in the case of the Bangladesh stock market. It hardly takes note of such developments. That is why the market is often seen rising when the country is in the midst of serious political troubles having serious negative effect on the economy.
The unexplained market rally that had taken place in the months of September and October of 2014 is attributed by some quarters to the entry of a number of banks and financial institutions awash with idle money. Following their entry, the DESX rose to the highest level of the year to 5334 points on October 12. The highest turnover was recorded at about Tk. 13 billion on September 18, 2014.
However, the rally was short-lived since the financial institutions, which had burnt their fingers in the 2010 collapse, reportedly along with small investors, withdrew from the market after making quick bucks.
The banks and other financial institutions had played a major role in taking the stock prices to an unsustainable level in 2010. But when the market collapsed, they too were the victims and a good number of them are still licking their wounds.
Many tend to describe the situation that prevailed in stock market in the year 2014 as 'stable'. However, few would be interested in such market stability where daily turnover plummets and small networks of manipulators-cum-rumour-mongers dictate terms.
That such networks are active was once again proved by the abrupt fall in the daily turnover since the introduction of the very efficient and most-modern trading platform in the DSE. The trading technology is equipped with the necessary software to detect any malpractice in trading. It is suspected that the smalltime manipulators, fearing detection, have withdrawn from trading which has led to the fall in turnover.
In fact, any turnaround of the market is unlikely to take place soon. The measures taken by the government to buoy up the market have not worked. But there are also historical reasons for this. The stock market until now has not been able to attract genuine long-term investors who are willing to earn attractive dividends regularly and make capital gains in the long-term.
When people started coming in small numbers to the market with their savings in the early part of 1990s with long-term investment plan, the 1996 scam had dealt a severe blow to their plan. It took more than 10 years to make the people look back again to the market. But the 2010 scam came almost as a death-blow.
The policymakers are least interested to talk about the stock market for it has caused enough of troubles for them. They have been at the receiving-end of severe criticism by the media and opposition politicians. So, it is better to keep the eyes shut.
But overlooking the needs of such a vital ingredient of the economy would never be wise. A strong vibrant capital market is all the more necessary for meeting the investment requirements of the private sector in particular.
However, fortunately, the demutualisastion of the bourses have offered them a real opportunity to grow strong and stable and make slow but steady progress in the task of instilling confidence among genuine investors. The boards of demutualised bourses to be dominated by independent directors have no reasons to falter in their objective of ensuring transparency and accountability. But they would need all the help and cooperation from the securities regulator and other stakeholders.
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