Good omens for stock market
Sunday, 10 February 2008
THE year 2007 was an eventful year for the country's stock market. Records in daily transactions, market capitalisation etc., were galore. The market for the first time since the crash of 1996 truly came back to life and, barring occasional aberrations, it maintained a vibrant mood, notwithstanding the fact that the development was not consistent with that of other areas of the economy. The market witnessed an inflow of enough domestic funds from undisclosed as well as open sources, leading to continuous buoyant mood in the market. However, matching with the prevailing upbeat mood of the investors, a good number of new companies, including the state-owned ones, made their entry into the market. The weaknesses of the market as far as quality and depth are concerned could be reduced, to some extent, during the year and that was very much evident from the sustained market buoyancy.
Against this backdrop, the chief of the capital market regulator-the Securities and Exchange Commission (SEC) -- last Thursday came out with some projections that would, obviously, sound sweet to investors, existing and potential ones. The SEC chairman talking to newsmen made projections that the market capitalisation of two bourses this year would double as some large state-owned and private companies were to go public soon. The market cap of the Dhaka Stock Exchange was more than US dollar 10 billion at the end of 2007. The state-owned Titas Gas Distribution and Transmission Company and the country's largest cell phone company-the Grameenphone-are scheduled to float large initial public offerings and get listed with the bourses. However, even doubling of the market cap would not help Bangladesh much to bring closer its position to other regional and Southeast Asian countries as far as the ratio of GDP and market size is concerned. Yet the market cap growing at a rate of 100 per cent or more within a period of only 12 months would be a landmark event that is bound to provide the much-needed impetus to the investors.
There exists scepticism whether the market would be able to absorb the entry of large IPOs like that of the Titas and Grameenphone. Given the market track record, such fear seems to be unfounded. The year 2007 is the best example when the market doubled its own size. Besides, the people would be happy to get their funds invested in stocks belonging to large and strong companies rather than keeping the same with banks that offer no profit, in real terms, at the end of the year. Moreover, there would be no dearth of funds from the institutional players in the market. There is no denying that the market, despite having some built-in weaknesses, has gained strength and become more disciplined than before. It can, possibly, now withstand a couple of mild tremors and start anew without raising much alarm. Now, there are enough reasons to be optimistic about the future of the country's capital market. Yet, the small investors, the most vulnerable group to any kind of shocks in the market, despite all those rosy pictures of the stock market situation, would do better if they keep in mind the piece of advice that the head of the market regulator had given late last week. They should not invest in stocks, particularly in an overheated market, with borrowed money. It would also be wise on their part if they do not put in stocks their small savings.
Against this backdrop, the chief of the capital market regulator-the Securities and Exchange Commission (SEC) -- last Thursday came out with some projections that would, obviously, sound sweet to investors, existing and potential ones. The SEC chairman talking to newsmen made projections that the market capitalisation of two bourses this year would double as some large state-owned and private companies were to go public soon. The market cap of the Dhaka Stock Exchange was more than US dollar 10 billion at the end of 2007. The state-owned Titas Gas Distribution and Transmission Company and the country's largest cell phone company-the Grameenphone-are scheduled to float large initial public offerings and get listed with the bourses. However, even doubling of the market cap would not help Bangladesh much to bring closer its position to other regional and Southeast Asian countries as far as the ratio of GDP and market size is concerned. Yet the market cap growing at a rate of 100 per cent or more within a period of only 12 months would be a landmark event that is bound to provide the much-needed impetus to the investors.
There exists scepticism whether the market would be able to absorb the entry of large IPOs like that of the Titas and Grameenphone. Given the market track record, such fear seems to be unfounded. The year 2007 is the best example when the market doubled its own size. Besides, the people would be happy to get their funds invested in stocks belonging to large and strong companies rather than keeping the same with banks that offer no profit, in real terms, at the end of the year. Moreover, there would be no dearth of funds from the institutional players in the market. There is no denying that the market, despite having some built-in weaknesses, has gained strength and become more disciplined than before. It can, possibly, now withstand a couple of mild tremors and start anew without raising much alarm. Now, there are enough reasons to be optimistic about the future of the country's capital market. Yet, the small investors, the most vulnerable group to any kind of shocks in the market, despite all those rosy pictures of the stock market situation, would do better if they keep in mind the piece of advice that the head of the market regulator had given late last week. They should not invest in stocks, particularly in an overheated market, with borrowed money. It would also be wise on their part if they do not put in stocks their small savings.