Dr Zahid for taking steps to stop foul play in capital market

FE Team | Published: February 06, 2025 00:16:40

Former lead economist of the World Bank's Dhaka Office Dr Zahid Hussain has urged the authorities concerned to take steps to prevent foul play in the capital market to restore general investors' confidence, reports BSS.
"If manipulation in initial public offering (IPO), scammed underwriting, opening fictitious BO accounts, and market rigging cannot be stopped, it is difficult to restore confidence in the market," he said in a recent interview with BSS at his residence in the capital.
The stock market regulator formulated a large number of policies, rules, and regulations, as well as passed orders over the last 15 years citing the best interests of investors.
However, most have backfired, leaving the stock market reeling from a crisis of confidence. According to the Dhaka Stock Exchange (DSE), the capital market was neglected, and even stakeholders failed to hold a single meeting for the past 15 years to resolve the problems and make policies to make it dependable as a source of investment.
In the last 10 years, the IPO market grew to only Tk 650 crore. Market insiders said good companies are coming in small numbers, while the number of investors declined by half in the last 10 years.
There are even fewer active investors. Currently, the amount of foreign investment has fallen to below 1.0 per cent. Although the amount of corporate bonds is reportedly 1 per cent, it is not more than 0.51 per cent in reality.
Analysts pointed out faulty decisions in the last 15 years, including the imposition of floor prices, allowing mutual fund tenure extensions and stock dividends as their returns, and allowing companies with poor performance records to make initial public offerings.
As part of the Bangladesh Securities and Exchange Commission's (BSEC) move to bring back vibrancy in the market, the regulator recently removed the floor price of most stocks.
The BSEC has also successfully implemented some initiatives to restore confidence. These include strengthening market oversight and discipline, establishing a policy for independent directors, establishing market intelligence by following international standards, digital transformation of the market, and expanding financial literacy nationwide. They are all at an early stage.
The regulator has also taken initiatives to introduce new financial instruments to boost institutional investment, align tax and policy frameworks, and strengthen stakeholders' engagement to create digital platforms for investors' education.
BSEC has established a five-member taskforce dedicated to spearheading capital market reforms. The taskforce's work is structured around 11 focus groups that have been formed to tackle key areas, including regulatory improvements, governance, investors' protection, and market innovation.
Each focus group has its own Terms of Reference, which outlines specific responsibilities for research, policy formulation, and recommendations in line with the overall reform agenda.
This collaborative approach ensures a holistic and thorough transformation of the capital market, addressing both macro- and micro-level challenges.
Speaking about the capital market, Zahid Hussain pointed out that the main problem is the lack of governance. Also, outdated technology and systems hinder efficient trading and market operations.
"Internal reforms in the stock market were not carried out by BSEC. This is the main reason for the lack of confidence and distrust in the market. Past market manipulations and scams have left investors wary," he mentioned.
He also said investors tend to buy shares whimsically and without judging the fundamentals while vested quarters take advantage of such behaviour to loot money from the market.
When asked whether there is any light at the end of the tunnel, he said, "We have to keep hopes alive."
"I can see a ray of hope because if anyone sees a problem in the economy and politics now, they can talk openly without thinking further.
"If the openness remains and if the government keeps open its feedback loop, you can certainly hope for a change. Hopes fade when the leaders deny everything," he added.