MCCI for reforming capital mkt instt, offloading profitable SOEs shares
Wednesday, 11 May 2011
FE report
Metropolitan Chamber of Commerce and Industry (MCCI) has recommended reform of the capital market institution and offloading of selected profitable SOEs shares and enlist multinational companies operating in the country to help market return to their fundamental level. In the third quarter performance report of 2010-11 fiscal, the chamber put forward a set of recommendations for the capital market to start consolidating and said the government should institute a thorough reform of the system and establish some short term, mid term and long term rules and regulations after discussing with all stakeholders. The MCCI said apart from meeting its commitement to off load SOEs, it should encourage multinational companies operating in Bangladesh to enlist in the country's stock exchanges as such listing is compulsory in the neighboring countries. It also recommends the Dhaka Stock Exchange and merchant banks to be more active to bring more private issues in the market, to persuade big listed companies to offload a bigger percentage of their shares to meet the growing demand for shares in the market. It also suggested to strengthening the regulatory mechanism and said, "Making it more transparent and accountable is crucially important to increase public confidence in the stock market." Ups and downs in stock prices and turnovers are a common phenomenon but it is generally the downward market trend that creates panic among the largely uninformed investors, the MCCI report said adding that in such situations , brokerage houses and merchant banks can do a lot to instill confidence among investors. In fact, brokerage houses and merchant banks have a mandated responsibility to advise the retail investors through orientation or training programs for prudently managing their share portfolio, it said urging electronic media and market analysts to play their moral responsibility to present objective reports on capital market developments and carefully avoid expressing views that may be misinterpreted by the uninitiated and send wrong messages about the market. MCCI which review the quarter witnessed a big upheaval in the capital market and said the general index of stock prices rose sharply from the beginning of fiscal and continued till the first week of December 2010 when a process of huge price correction set in declining the index by 40.4 percent on 31 March 2011. It was happened as the commercial and merchant banks resorted to heavy selling and booked large profits, followed by selling pressures from nervous retail investors. The central bank's monetary policy stance in the second half (H2) of FY1 1 remains very much the same as in the first half (1 11) of the fiscal. The Monetary Policy Statement (MPS) for H2 states that the BB's monetary policies will continue to be growth supportive and preserve price stability. In pursuit of broad based economic growth, BB's credit policies and programs in H2 will be directed to channeling adequate credit flows for productive purposes, especially to underserved sectors like agriculture, SME, renewable energy and other eco friendly projects. At the same time, BB's policy will be to discourage undue expansion or diversion of bank credit to unproductive and wasteful uses in order to stem buildup of inflationary pressures. The Cash Reserve Requirement (CRR) and policy interest rates, repo and reverse repo, are the major tools used by 1313 to keep the inflation rate in check. 1313 raised the CRR to 6 percent in December, 2010 and the repo and reverse repo rates on 18 August 2010 to 5.5 percent and 3.5 percent, respectively (Table 4). Prior to August 2010, the repo and reverse repo rates were 4.5 percent and 2.5 percent, respectively. The central bank recently withdrew the prevailing 13 percent interest rate cap on bank lending, except on agriculture and industrial term loans. The withdrawal of the lending cap is part of the conditions attached by the IMF to the 1 billion dollar credit offered to BB. A section of the business community has expressed concern that the withdrawal of the lending cap will raise the cost of working capital of industries and hurt their competitiveness. Banks are reported to have already begun charging 3 to 4 percent higher interest rates on loans. BB has, however, allowed the interest rate on export credit to remain at 7 percent as before. The interest rate on import finance for rice, lentil, edible oil, gram, onion, date and sugar will also remain unchanged at 12 per cent.
Metropolitan Chamber of Commerce and Industry (MCCI) has recommended reform of the capital market institution and offloading of selected profitable SOEs shares and enlist multinational companies operating in the country to help market return to their fundamental level. In the third quarter performance report of 2010-11 fiscal, the chamber put forward a set of recommendations for the capital market to start consolidating and said the government should institute a thorough reform of the system and establish some short term, mid term and long term rules and regulations after discussing with all stakeholders. The MCCI said apart from meeting its commitement to off load SOEs, it should encourage multinational companies operating in Bangladesh to enlist in the country's stock exchanges as such listing is compulsory in the neighboring countries. It also recommends the Dhaka Stock Exchange and merchant banks to be more active to bring more private issues in the market, to persuade big listed companies to offload a bigger percentage of their shares to meet the growing demand for shares in the market. It also suggested to strengthening the regulatory mechanism and said, "Making it more transparent and accountable is crucially important to increase public confidence in the stock market." Ups and downs in stock prices and turnovers are a common phenomenon but it is generally the downward market trend that creates panic among the largely uninformed investors, the MCCI report said adding that in such situations , brokerage houses and merchant banks can do a lot to instill confidence among investors. In fact, brokerage houses and merchant banks have a mandated responsibility to advise the retail investors through orientation or training programs for prudently managing their share portfolio, it said urging electronic media and market analysts to play their moral responsibility to present objective reports on capital market developments and carefully avoid expressing views that may be misinterpreted by the uninitiated and send wrong messages about the market. MCCI which review the quarter witnessed a big upheaval in the capital market and said the general index of stock prices rose sharply from the beginning of fiscal and continued till the first week of December 2010 when a process of huge price correction set in declining the index by 40.4 percent on 31 March 2011. It was happened as the commercial and merchant banks resorted to heavy selling and booked large profits, followed by selling pressures from nervous retail investors. The central bank's monetary policy stance in the second half (H2) of FY1 1 remains very much the same as in the first half (1 11) of the fiscal. The Monetary Policy Statement (MPS) for H2 states that the BB's monetary policies will continue to be growth supportive and preserve price stability. In pursuit of broad based economic growth, BB's credit policies and programs in H2 will be directed to channeling adequate credit flows for productive purposes, especially to underserved sectors like agriculture, SME, renewable energy and other eco friendly projects. At the same time, BB's policy will be to discourage undue expansion or diversion of bank credit to unproductive and wasteful uses in order to stem buildup of inflationary pressures. The Cash Reserve Requirement (CRR) and policy interest rates, repo and reverse repo, are the major tools used by 1313 to keep the inflation rate in check. 1313 raised the CRR to 6 percent in December, 2010 and the repo and reverse repo rates on 18 August 2010 to 5.5 percent and 3.5 percent, respectively (Table 4). Prior to August 2010, the repo and reverse repo rates were 4.5 percent and 2.5 percent, respectively. The central bank recently withdrew the prevailing 13 percent interest rate cap on bank lending, except on agriculture and industrial term loans. The withdrawal of the lending cap is part of the conditions attached by the IMF to the 1 billion dollar credit offered to BB. A section of the business community has expressed concern that the withdrawal of the lending cap will raise the cost of working capital of industries and hurt their competitiveness. Banks are reported to have already begun charging 3 to 4 percent higher interest rates on loans. BB has, however, allowed the interest rate on export credit to remain at 7 percent as before. The interest rate on import finance for rice, lentil, edible oil, gram, onion, date and sugar will also remain unchanged at 12 per cent.