The share market was rising fast in the first two years of this government. But an unprecedented decline occurred in the third year. It continued in the fourth year. In the final year, political instability influenced the market. In overall assessment of the financial sector, the highest devastation was in the share market. Transactions, market capitalisation and fluctuations in indexes created records. Rumour, instability, demonstration, siege, litigation, arrests and encounters with the police happened time and again. The investors also called for hartals. Statements from the government functionaries made the situation more volatile. The Bangladesh Securities and Exchange Commission (BSEC) could not stop the ups and downs of the share market.
Small investors lost their capital. But a section of businessmen made money, allegedly, through fraudulent means. No action was taken against them. The government was allegedly protecting those people.
The proposal for creating a fund of Tk 100 billion for stabilising the share market did not materialise. There was widespread criticism about the share market. The opposition was critical about this. They called it digital fraud. Economists said the government failed in this sector. According to them, weak financial management was responsible for the mess in the share market. In 1996 also, disaster struck the share market during an Awami League government.
There were a number of reasons for the initial rise in the share market, such as scarcity of shares, aggressive investment by banks and financial institutions, excessive loan disbursement by banks and brokerage houses, focus of the industrialists in the secondary market and manipulation of vested quarters. Investment of black money enhanced the flow of funds. As a result, share market became a gambling spot. On January 09, 2011, the index fell by more than 600. The index fell by 551.76 on January 19h. On January 20, the index fell by 587.04. That was the collapse of the share market.
The Beximco group collected Tk 16.31 billion and the Summit group Tk 14.85 billion from the share market. The Navana group could collect Tk 5,560 million in the first two years. The government appointed an enquiry committee under the chairmanship of Mr Ibrahim Khaled. He submitted a report in two months. Some business people were named in the report. But no action was taken against them. The BSEC was reconstituted after submission of the enquiry report.
The Prime Minister had to intervene in the market to stop its further fall. She met the concerned people connected with the market. A lot of recommendations were made in the meeting. Thereafter, many incentive packages were announced. But the incentives did not have tangible impact on the market. Incentives were not implemented in full.
During the tenure of this government, 77 new companies were listed in the market. This means, 15 companies were listed every year on the average. In 2013, 16 companies were listed and these companies collected Tk 11.74 billion from the market. In 2012, 14Â companies were listed and they realised over Tk 1,054 million. In 2011, 14 companies were listed and their collection stood at Tk 18,790 million. Sixteen companies collected Tk 26,530 million in 2010. Fifteen companies were listed in 2009.
There was a lot of confusion about investment by government servants. Initially they were not allowed to invest in share market. But finally they were allowed. The Bangladesh Bank and the BSEC stood face to face regarding the control of merchant banks. The matter was settled through discussion and the BSEC got the control of merchant banks.
Black money was not invested in share market in a big way. In five years, black money, worth Tk 12,140 million, was whitened for investment in share market. There was a lot of criticism about whitening black money for the purpose of investment in the share market.
Different international organisations have made evaluations about the share market. The World Bank has opposed investment of black money there. It also has not supported use of bank funds for share market as this will enhance risk of banks. The IMF has opposed the creation of bank funds for investment in the share market. The Asia Pacific Group on money laundering opposed the use of black money in the share market.
The Bangladesh Securities and Exchange Commission Act 2012 was passed in parliament. The term of the Chairman and commissioners was extended from 3 to 4 years. The BSEC was given the authority to call for bank accounts. It also can spend funds according to its own decisions. The provision of omnibus account has been abolished. Every investor must have separate BO (Beneficiary Owners) account.
There is a lack of professionalism among the investors. The government has taken the initiative for demutualisation. As a result, 40 per cent of owner-directors will be in the board of management.
The BSEC has announced a ten-year plan for development of the share market. Known as capital market master plan, this will conclude in 2020. The plan includes budget preparation, empowerment of the BSEC, long-term guideline for IPO (Initial Public Offering), creation of a separate tribunal, preparation of Financial Reporting Act to set up derivative market, expansion of bond market and so on.
The Prime Minister has said that her government has taken steps to restructure the share market, including the ten-year master plan for the development of the capital market as well as for safeguarding the interest of the investors. But stocks saw sharp decline on November 24 with declining turnover. Shaky confidence has overpowered market optimism. Investors' mood is cautious as political instability may hinder a quick recovery.
The writer is an economist and columnist.
 syedjamaluddin22@yahoo.com
Ups and downs of the share market
Syed Jamaluddin | Published: November 28, 2013 00:00:00 | Updated: November 30, 2024 06:01:00
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