Stock prices overvalued due to lack of supply: SEC
FE Report | Monday, 9 June 2008
The securities regulator has expressed concern over the lack of securities supply in the stock market, making it overvalued.
"Over the last one year the supply side remains a serious problem, making the market overvalued," said Faruq Ahmad Siddiqi, chairman of Securities and Exchange Commission (SEC) in the city on Sunday.
He was speaking at the monthly luncheon meeting of the Foreign Investors' Chamber of Commerce and Industry (FICCI) at a city hotel. FICCI president Waliur Rahman Bhuiyan, member of the chamber Anis A Khan and a number of foreign investors were present at the meeting.
"But the positive side is that the investors regained confidence overcoming the shock of 1996 that kept them aloof from the market," SEC chief said adding they are back in the market provided the current transaction of the market is huge.
On increase of supply side of securities in the stock market, he said the government is making its best efforts to offload more state-owned enterprises (SoEs) to address the supply side problem, which is also a positive indication for private sector led growth. All the proposed initial public offerings (IPOs) applications submitted to the SEC will be released as soon as possible, he added.
Venting his dissatisfaction over the private sector's lack of interest to come in the stock markets, he said, "The basic problem is that private sector cannot come forward to boost the supply side, which is disappointing."
Siddiqi said, they show excuse that they will not get fair IPO pricing but there may be other factors like fear of disclosure of corporate management.
"The private sector should keep in mind that the SEC has always open mind to give premium to fix fair IPO pricing but it should be justified behind seeking premium," he said.
He said, the total market capitalisation is now near to $ 13 billion, which is eight per cent of total GDP. This figure shows the market is still small in compare with the regional stock exchanges, he added.
"But in the same time the market has immense potentials for the portfolio and local investors as the market is going through a lot of reforms made in the past year to make the market investment friendly.
About 90 per cent paper shares has already been converted into electronic scrips to make the transaction transparent and swift, he said adding that SEC wants 'book building method in IPO' but it needs more study.
During 2005-06 foreign investment is negligible but the scenario of the market has drastically changed during 2006-07 when the amount of foreign investment grew overwhelmingly, reflecting the confidence of the investors.
He said, "We cannot even say that our capital market is emerging. Right at the moment many global investment banks termed the market frontier'. We will be real emerging market in days to come."
In reply to question from the foreign investors, SEC chief said, the SEC allows to float IPO of those companies that are in operation in three consecutive years with profit.
The FICCI chief said that manufacturing sector is not showing interest to go public and SEC should keep vigilance on protecting the general investors' interest.
FICCI secretary general M A Matin was also present.
"Over the last one year the supply side remains a serious problem, making the market overvalued," said Faruq Ahmad Siddiqi, chairman of Securities and Exchange Commission (SEC) in the city on Sunday.
He was speaking at the monthly luncheon meeting of the Foreign Investors' Chamber of Commerce and Industry (FICCI) at a city hotel. FICCI president Waliur Rahman Bhuiyan, member of the chamber Anis A Khan and a number of foreign investors were present at the meeting.
"But the positive side is that the investors regained confidence overcoming the shock of 1996 that kept them aloof from the market," SEC chief said adding they are back in the market provided the current transaction of the market is huge.
On increase of supply side of securities in the stock market, he said the government is making its best efforts to offload more state-owned enterprises (SoEs) to address the supply side problem, which is also a positive indication for private sector led growth. All the proposed initial public offerings (IPOs) applications submitted to the SEC will be released as soon as possible, he added.
Venting his dissatisfaction over the private sector's lack of interest to come in the stock markets, he said, "The basic problem is that private sector cannot come forward to boost the supply side, which is disappointing."
Siddiqi said, they show excuse that they will not get fair IPO pricing but there may be other factors like fear of disclosure of corporate management.
"The private sector should keep in mind that the SEC has always open mind to give premium to fix fair IPO pricing but it should be justified behind seeking premium," he said.
He said, the total market capitalisation is now near to $ 13 billion, which is eight per cent of total GDP. This figure shows the market is still small in compare with the regional stock exchanges, he added.
"But in the same time the market has immense potentials for the portfolio and local investors as the market is going through a lot of reforms made in the past year to make the market investment friendly.
About 90 per cent paper shares has already been converted into electronic scrips to make the transaction transparent and swift, he said adding that SEC wants 'book building method in IPO' but it needs more study.
During 2005-06 foreign investment is negligible but the scenario of the market has drastically changed during 2006-07 when the amount of foreign investment grew overwhelmingly, reflecting the confidence of the investors.
He said, "We cannot even say that our capital market is emerging. Right at the moment many global investment banks termed the market frontier'. We will be real emerging market in days to come."
In reply to question from the foreign investors, SEC chief said, the SEC allows to float IPO of those companies that are in operation in three consecutive years with profit.
The FICCI chief said that manufacturing sector is not showing interest to go public and SEC should keep vigilance on protecting the general investors' interest.
FICCI secretary general M A Matin was also present.