There is hyped expectation in the secondary market that it will recover after the upcoming national election with the return of political stability, but experts rule this out, saying fundamental change is imperative.
They say the overhaul of the banking sector should continue under the elected government to ensure sustainability, and macroeconomic challenges must be addressed to support progress.
The DSEX, the broad index of the Dhaka Stock Exchange (DSE), recorded an appreciation of 3.42 per cent, or 169 points, from January 11 to close at 5,108 points on Tuesday. The index then experienced marginal correction over the following two sessions through Thursday.
Meanwhile, representatives of the Dhaka bourse and the DSE Brokers Association (DBA) last week called on BNP Chairman Tarique Rahman and discussed issues related to the capital market.
Tarique Rahman assured them that he would sit with market intermediaries again if his party comes to power, said Minhaz Mannan Emon, a shareholder director of the Dhaka bourse, while speaking to The FE over the phone.
During the meeting with the BNP chief, market operators highlighted the scarcity of quality IPOs (initial public offerings), lack of accountability, and the liquidity crisis in the market.
They also said investors holding large idle funds were reluctant to invest in the equity market due to a lack of confidence.
"The revival of the capital market is a must for the salvation of the national economy," Emon said.
Speaking about the securities regulator, market representatives said a qualified person with knowledge of both local and international markets should be appointed as its chief.
Investors and market intermediaries have been contemplating the possible outcomes of the national election and subsequent policy support for the equity market.
Amid hopes and anxieties, the index continues to fluctuate.
Experts said the capital market would likely see a rally after the national election, but such rallies would not be sustained unless fundamental value is added to the financial ecosystem.
Md Ashequr Rahman, managing director of Midway Securities, said the depth of the equity market is very shallow due to the lack of quality scrips.
Secondly, the equity market is closely linked to the money market, where most banks are facing a severe liquidity crisis stemming from scams and financial mismanagement.
"The banking sector has been undergoing reforms. The overhaul should continue even after the national election under the political government," Rahman said.
A positive resolution of the crises at scam-hit banks and financial
institutions would largely help sustain a recovery in the equity market, he added.
Apart from five merged banks and nine financial institutions undergoing liquidation, many other banks and financial institutions are on the verge of collapse.
Banks are surviving by relying on investments in Treasury bonds. The next government must move away from this trend by ensuring that banks' lending businesses revive, which would be reflected in the economy and the market through increased business investment.
mufazzal.fe@gmail.com
