Stock market: Debate over crisis of confidence

Some big guns are seemingly extremely unhappy about the current stock market situation. There are no earthly reasons to be happy about a market that has been stagnant for more than five years in a row.  But when it comes to making public statements even on an unpalatable situation, some people do need to exercise caution.
The classic observation -- the local market (stock) is not at all suitable for long-term investment. This is rather perfect for earning profit through short-term casino and rumour-based investment -- came from a person none other than the executive chairman of the Board of Investment (BoI) in the first working session of the two-day 'Bangladesh Investment and Policy Summit', held in Dhaka last Sunday.
The BoI top notch lamented that entrepreneurs are forced to borrow from banks at high lending rates instead of mobilising funds from the stock market because the image of the latter was 'very weak'.  
 Khandaker Ibrahim Khaled, former deputy governor of Bangladesh Bank and head of the committee that had investigated the 2010 share scam, in an interview with a  Bengali contemporary last Monday found the lack of confidence among the investors as the main reason for the current moribund state of the country's stock market. He even suggested a change in the top position of the securities regulator.  
However, the Bangladesh Securities and Exchange Commission (BSEC) at a press conference on the same day refuted the observation about the lack of confidence in the market and claimed the market situation was 'relatively' stable.
The foreign portfolio investment has been always insignificant in Bangladesh market. But any prospective foreign portfolio investor would, possibly, think twice before coming to Bangladesh after the BoI executive chairman's observation.
Such observations are causing more harm than good to the market that, unfortunately, has not got proper and well-researched patronisation since its inception.
Rather factors such as ad-hoc measures to manage the market, highhandedness on the part of crooks and manipulators in the absence of modern technology-based efficient regulatory oversight, unwillingness of a section of privately owned companies to expose themselves to public scrutiny and accountability and their easy access to banks' funds have not allowed the stock market to grow and acquire the much-needed depth.
The 1996 scam has caused an irreparable damage to the investors' psyche. It had infused 'greed' factor into the minds of both long-term and ignorant investors. The latter had come to the market to become rich overnight. But when the market collapsed, both informed and ignorant investors left the market.  A few of long-term investors after a reasonable gap of time made a slow but gradual comeback. But the ignorant ones stayed away from the market permanently.  However, they could hardly resist the temptation when a select group of skilled manipulators took the market to a new high at a slow but calculated pace in 2009 and 2010. The ignorant and greedy section of investors returned to recoup the loss they had suffered in 1996 and again burnt their fingers.  
Why are not people investing in listed stocks, particularly those paying more profit, in the form of annual dividends, than what the banks give against time- deposits?
It is often claimed that the market has a good number of listed stocks having strong fundamentals. But how many of such stocks are so? What is the average rate of return on investments in such shares? A close scrutiny would reveal that 'good' stocks are too pricey, if compared with their actual rate of return.
Then again, there are doubts whether the listed companies are paying due return to the investors as they allegedly manage paying less by fixing their books of account with the help of auditors.
That the market situation is still imperfect is manifested through high demand and high prices of newly listed issues. In fact, the market is proving its existence through the trading of new issues. A sort of gambling has been going on and the authorities concerned are partly responsible for it. Questions are being asked about the rates of premium allowed to a number of new issues. The BSEC has lately amended the public issue rules under which any company wanting to float primary shares with premium will have to do it under the Book Building method, which had been allegedly used to exploit investors during the 2010 stock rally.
There are lots of imperfections in the Bangladesh stock market. Ridding the market of the same remains a hell of a job. The government, if it is really willing to do so, should find out a team of genuine experts from both home and abroad to pinpoint the imperfections and remove those at any cost.
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